June 3, 2016, 13:00 JST

Wage growth remained stagnant in April

In April 2016, the regular (basic and overtime) wage index rose only by 0.2% year on year, a deceleration from 0.7% in March. The deceleration is disappointing. Until this latest reading, the regular wage index were enjoying a moderate but persistent acceleration in the last 12 months. A few more months of further acceleration would have given a reason for a hope that wages in Japan are finally rising.

After taking account of inflation, real wages are up by 0.6% year on year. However, when we consider that real wages in Japan has been declining for years, the rise offers only a little consolation. In real terms, real wages is still close to the lowest point in 30 years.

It is too early to write off the chance of a resumption in wage inflation, but we are not hopeful. While the labor market is tight and it should encourage wages to rise, this condition has already been in place for a while. The unemployment rate has been below 3.5% for over a year, but we are yet to see any concrete sign that wage is on the rise. Now that corporate profits seems to be coming under pressure from yen appreciation and stagnant economic condition, corporate managers are likely to take a conservative stance on wages.