Future of Japan's Run of Good Fortune All Comes Down to Wages

(Bloomberg) -- Japan’s ability to sustain the longest economic expansion since the mid-1990s and revive inflation may come down to whether wages go up.

With individual measures only showing part of the picture, investors need to monitor a dozen separate gauges to check the health of the labor market. The latest readings show it could hardly be easier to find a job, with unemployment the lowest in decades, and robust pay gains for part-timers. Salaries are rising for full-time workers, but ever so slowly, and inflation is stripping away much of the benefit. Productivity is short of what employers need.

"Inflation is unlikely to gather momentum without faster growth in wages," according to Bloomberg economist Yuki Masujima. "The tightest job market since the 1970s suggests pay should rise as companies vie for talent. A decline in labor productivity growth though, points the other way."

In the charts below, we’ve made a call on which gauges appear to be moving in the right direction to produce pressure for higher wages, coloring them green. Those that are neutral are shown in orange while red indicates measures that are going the wrong way or remain too weak.

Wages

Employment

Productivity

Note: Percentage changes and absolute numbers in charts show monthly changes versus a year earlier. Full-timer wages are scheduled wages excluding overtime and bonuses.
Sources: Ministries of labor and internal affairs, Japan Productivity Center.

--With assistance from Toru Fujioka

To contact the reporters on this story: Brett Miller in Tokyo at bmiller30@bloomberg.net, Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, James Mayger

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