There's good news behind the surprisingly weak data!The market is unlikely to abandon expectations that the Bank of Japan will raise interest rates in the coming months.
Japan's headline wage growth slowed sharply in November, an unwelcome development for the Bank of Japan (BOJ) as it looks for evidence that there is a virtuous circle between wage growth and prices**, which is a prerequisite for monetary policy normalization.
Data from Japan's Ministry of Health, Labor and Welfare showed on WednesdayJapan's labor cash income rose 02% compared to 1 in OctoberThe 5% increase slowed sharply. Real wages fell by 3%, much larger than the consensus expectation of a 2% decline.
AlthoughWednesday's data will support the case for the Bank of Japan to maintain its ultra-loose policy this month, but they are unlikely to prevent economists** the bank from raising interest rates in the coming months.
The Bank of Japan has begun looking ahead to the annual wage talks, which are expected to conclude in March. Japan's largest trade union federation has urged companies to raise wages by at least 5% in principle. Kazuo Ueda told NHK late last month that there was a chance that the authorities could make some decisions even if they didn't get the full results of the small business pay discussions, which might not be available until the summer.
This remark sparked speculation, namelyThe potential timing of the BoJ rate hike will be the April monetary policy meeting
The Bank of Japan will meet in two weeks' time. In addition to setting interest rate policy, they will also release an updated outlook for inflation and economic growth.
Harumi Taguchi, chief economist at S&P Global Market Intelligence, said: "The current situation isWage growth has not yet caught up with prices。Given the strong impact of the base effect last year and the weakness in some sectors, I thinkInflation has not yet entered a virtuous circle。She still expects the Bank of Japan to exit negative interest rates as early as April.
The above data avoids sampling issues and excludes bonuses and overtime pay, suggesting that the underlying trend in compensation remains broadly unchanged. The year-on-year increase in core wages for ordinary workers slowed by 01 percentage point to 19%。Kazuo Ueda has said in the past that he is keeping an eye on the data.
Taro Kimura, an economist at Bloomberg Economics, pointed out that "behind the unexpected weakness in Japan's labor cash earnings in November, there is something hidden."Good news, the basic salary of ordinary workers increased by 19%, which was before Japan fell into the quagmire of low growth in the early 90s. ”
Saisuke Sakai, a senior economist at Mizuho Research & Technologies, said: "Since this summer, the wages of ordinary workers have been growing steadily, around 2 percent. The basic tone of wages is, to some extent, one of continuous growth. ”
At the beginning of the new year, Japanese Prime Minister Fumio Kishida spoke at a series of business association events, further calling for a major increase in wages. The draft budget for the fiscal year beginning in April includes a 1 trillion yen ($6.9 billion)** to spur wage increases and mitigate the impact of inflation.
As the labor market continues to tighten, forcing companies to compete to hire employees, some companies have said they plan to raise wages significantly.
According to Nikkei, Nomura Holdings announced a 16% pay rise for younger employees at its brokerage subsidiary, and supermarket and convenience store operator Aeon CoThe plan is to raise hourly wages by 7 percent for 400,000 part-time employees by the summer. Tokyo Electron will raise starting salaries by about 40% on average.