TOKYO • Japan's companies reduced bonus payments in July, leading to a surprise drop in total pay for workers. While this was the first fall in 14 months, previous gains have been weak and well below the level needed to generate stronger inflation.
Total cash earnings, including overtime and bonuses, declined 0.3 per cent from a year ago, from an estimated 0.5 per cent rise.
Adjusted for inflation, total cash earnings slipped 0.8 per cent.
Bonuses and allowances dropped 2.2 per cent. Scheduled monthly base wages per full-time worker rose 0.3 per cent in July from a year ago, labour ministry data show.
Hourly pay per part-time worker grew 2.9 per cent.
Japan's labour market is the tightest it has been in decades, but that has not translated into sustained wage pressures.
Base wages for full-time workers have not risen more than 1 per cent in any month over the last two years. While part-time workers are seeing better per-hour pay, they are working fewer hours.
A drop in summer bonuses weighed on overall cash earnings in July and winter bonuses are likely to be lower than last year, said Meiji Yasuda Life Insurance chief economist Yuichi Kodama.
"Scheduled pay, which has a bigger impact on consumer spending, is rising only slowly and real wages will probably keep dropping for a while. That means consumer spending will struggle."
Nomura Securities senior economist Masaki Kuwahara said: "My conclusion is the pace of wage gains remains weak, weighing on consumer spending."
Weak summer bonuses were expected because they are based on corporate earnings a year ago, when the yen was rising, he said.
Number of hours worked dropped 0.5 per cent; full-time workers worked 0.2 per cent fewer hours while part-timers worked 1.9 per cent less.
Overtime pay climbed 0.1 per cent.