Japan’s real wages rise for second month in July on strong bonuses

Japan's inflation-adjusted wages rose for a second straight month in July, bolstered by a bump in summertime bonuses, government data showed on Thursday.

Real wages in the world's fourth-largest economy grew 0.4 per cent in July, rising at a slower pace than June's 1.1 per cent growth when it turned positive for the first time in 27 months, data from the labour ministry showed.

The timing of the BOJ rate hike largely depends on wages. BOJ Governor Kazuo Ueda has reiterated that inflation will not durably reach the central bank's 2 per cent target without broad-based increases in pay accompanying the rise in prices.

July's slowdown in real wage growth was because fewer firms paid bonuses in that month compared to June, according to a labour ministry official. Special payments rose 6.2 per cent in July, after a revised 7.8 per cent increase in the previous month.

Most companies pay summer bonuses in June and July, so the contribution of special pay to lifting real wages would disappear from August, the official said.

"From August and thereafter monthly wages (composed of regular and overtime payment) will be a deciding factor" in anchoring growth in the real wages, the official said.

Nominal wages, or the average total cash earnings per worker, grew 3.6 per cent to 403,490 yen ($2,785.19), compared with a 4.5 per cent increase in June when it marked the fastest pace of growth since January 1997.

Base pay, or regular pay, rose 2.7 per cent, the fastest growth in almost 32 years, boosted by results of this spring's labour-management wage talks. Overtime pay, which reflects the strength of corporate Japan, fell 0.1 per cent in July after a revised 0.9 per cent gain in June.

Japanese firms agreed on an average pay increase of 5.10 per cent per month this year- the highest pay growth in 33 years.

Meanwhile, the consumer price index officials use to calculate real wages, which includes fresh food prices but excludes owners' equivalent rent, rose 3.2 per cent, edging down from a 3.3 per cent gain the previous month.

"Prices are still at a high level, so if prices subside a little more, real wages may continue to be positive," the official said.