Hamilton Crawford: Japan Struggles to Meet Wage Growth Target

Hamilton Crawford: Abenomics continues to fail to convince businesses to increase wages.

In December, the wages of Japanese laborers decreased at their quickest pace in five months, a possible indication that consumers may reduce their spending and further exacerbate the central bank’s difficult task of reaching its 2 percent inflation target.

Hamilton Crawford analysts believe the lukewarm wage data also indicates that the government is encountering significant difficulty in its efforts to encourage firms to increase wages by at least 3 percent in 2018 at yearly wage discussions with labor unions.

Japanese Prime Minister Shinzo Abe’s economic strategy, known as “Abenomics,” has managed to increase business investment and brought more women into the labor force, but it has not been as successful persuading businesses to increase salaries.

A Hamilton Crawford economist stated that standard salary increases are not in keeping with the increasing prices that consumers are facing and that this has been a problem with Abe’s Abenomics policy since it began. It has not been able to achieve the government’s target of a 3 percent wage increase.

According to data recently released by the labor ministry, real wages - adjusted for inflation – decreased by 0.5 percent in December from December the year before. The decline came in the wake of a 0.1 percent yearly increase in November and signaled the biggest decline since a 1.1 percent yearly fall in July last year.

Last year real wages decreased by 0.2 percent after a 0.7 percent increase in 2016.

Hamilton Crawford economists predict that Japan’s economy expanded for an eighth consecutive quarter in the 4th quarter of last year, the longest period of growth in 3 decades.

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Source: Hamilton Crawford