Japan’s nominal labor cash earnings rose by 0.8% yoy in January, below expectations of 1.9% yoy. The strong growth rate of 4.1% yoy in December was an anomaly due to lump-sum payments, rather than regular wage rises. The level of wage growth is far below the required level needed to maintain a 2% inflation rate, as indicated by outgoing BoJ Governor Haruhiko Kuroda.
Moreover, real cash earnings of workers have declined by -4.1% yoy, indicating that their real wages have fallen the most since 2014. The continuous decline in real wages for ten consecutive months shows that inflation has surpassed earnings.
Later in the week, BoJ is expected to keep its ultra-loose monetary policy unchanged, including the negative short-term interest rate of -0.10% and the 10-year yield cap at 0.50% at Kuroda’s final meeting before handing over the reins to Kazuo Ueda. The declining real wages poses a challenge for the incoming governor to achieve the inflation target set by the central bank.
