Japan’s Wages Eke Out Meager Gain as Kishida Eyes Tax Breaks
(Bloomberg) -- Japanese wages eked out meager gains in September, the latest indication of a weak pay trend that Prime Minister Fumio Kishida has vowed to strengthen via an upcoming stimulus package.
Cash earnings for Japan’s workers edged up 0.2% compared with a year earlier, the labor ministry reported Tuesday. Economists had predicted a 0.6% gain. The incremental rise shows that pay has yet to get a major recovery boost as the pandemic eases.
Kishida has made it one of his missions as leader to raise wages and support the middle class so that longer-term growth benefits a wider segment of the population. With that message, the prime minister fared better than expected in last month’s national election, maintaining a solid majority for the ruling party.
In the shorter-term, whether people can spend more to support the economy will also be a key factor for Japan’s recovery as it recovers from a likely contraction last quarter.
While wages appear to have been improving this year, pay is still measured against the low levels of last year and the gains are far below levels seen necessary to help inflation reach 2%.
“I don’t see a dramatic rise in wages for some time, while prices are going to increase first. So real wages will keep falling, having a negative impact on spending,” said economist Atsushi Takeda at Itochu Research Institute.
Measured against an overall gauge of inflation, wages actually fell 0.6% in September from a year earlier, indicating that households’ spending power is getting relatively weaker, not stronger.
Kishida is putting together an economic stimulus package this month to help shore up Japan’s recovery as it emerges from its fourth state of emergency.
He plans to give more tax breaks to firms that raise wages, and improve the salaries of public sector workers such as nurses, caregivers to the elderly, and kindergarten teachers.
A new capitalism panel said Monday that it will push for the reforms to raise wages mentioned by Kishida, while suggesting other measures to improve innovation, including the possible introduction of blank-check acquisition firms.
The panel also called for additional support for smaller and mid-size companies to boost workers’ compensation even if those firms are technically in the red.
“In the longer term the labor market will undoubtedly become tighter and tighter, and there’ll be increasing moves to raise pay,” Takeda said.
But pushing firms to nudge up wages beyond that through tax breaks and other policy measures will prove to be a heavy lift for Kishida, he added.
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