Japan Wage and Hours Worked

In November 2016, total wages rose by 0.5% year on year, improving slightly from October. The regular wage component, consisting of basic and overtime wages, rose by 0.3% year on year in November.

Published monthly by the Ministry of Health, Labour and Welfare. Updated to the month of November 2016 (published on January 20th, 2017).

Recent data trend:

The total wage rose by 0.5% YoY in November 2016, accelerating from 0.1% YoY rise in the previous month. On the other hand, Japan’s real wage fell by 0% YoY in November, remaining unchange from October. It seems the positive effect of falling consumer prices for households are fading. The regular wage component, consisting of basic and overtime wages, rose by 0.3% YoY in November.

In our view, Japanese wages should be on a moderately rising trend as the labor market continues to tighten. Employers also have some rooms in their revenue to raise their workers' salary, as corporate profits in Japan rose by 11.5% in the July-September quarter.

However, a rise of 0.3% YoY on nominal terms in the regular wage is hardly a wage inflation and it seems it may still need some time for the wage inflation to accelerate to a pace consistent with the 2% inflation target by the BoJ. To make matters worse, the Japanese economy is probably peaking off from its cyclical peak and the wages could easily start to decline year on year if the economy is hit by a negative economic shock down the road. In effect, the unprecedented monetary stimulus that started in 2013 has failed to bring fundamental change in both household and corporate behavior. The deflationary expectation seems quite entrenched in Japan and the BoJ actions in the past 4 years failed to change it.

It has been quite some time since IMF has been advocating to address the labor market reforms through increase in minimum wages, boosting regular workers’ mobility, removal of spousal tax credit, using tax incentives to promote pay hikes. While we agree with the direction of how reforms should proceed, we are doubtful that reform efforts would bear fruits in the near future. While we do not deny a possibility that the wage inflation may eventually come about, we think the pace of acceleration is so slow that it is more likely that some negative economic shock would shock the economy downward before the wage inflation rises far enough for the BoJ to achieve its inflation target.  

Brief overview of “Wage and Hours worked”

Official name of the statistics is “Monthly Labor Survey”, but we prefer to call it “Wage and Hours worked” to distinguish the survey from “Labor Force Survey” which is the source of the official unemployment rate in Japan. “Wage and Hours worked” surveys enterprises with a work force larger or equal to 5 persons. It also does not include government and municipal officials. For example, in 2012, “Wage and Hours worked” survey covered 45.8 million workers in Japan, while “Labor Force Survey” covered 62.7 million workers. YoY% wage growth rate shows irregularity, as the months of bi-annual bonus payment day shift between months depending on the year. 3 or 6-month average YoY% is often used to overcome this problem. Wages in Japan has been steadily falling in Japan since 1998. Between 1997 and 2012, wages has fallen by 12.5%, or by 0.9% per year on average.

"Part time hourly wage", "Temp hourly wage" are statistics published by JOBS Research Center (JBRC), a research center established within Recruit Jobs Co., Ltd. As of July 17, 2015, the original publication are published only in Japanese. Below are a link to their web site (available only in Japanese)http://jbrc.recruitjobs.co.jp/

Wage levels of Full-time and Part-time workers

Source: MHLW, JMA.

The Next Release Date:February 6th, 2017 (Preliminary December data)    

                                      February 22nd, 2017 (Revised December data)