Japan – July wages

The wage data don't change the macro picture. Wages are creeping up, but are rising less quickly than inflation. The labour market isn't yet tight enough for nominal wages to accelerate much more.

Overall wages continued to rise by around 2% YoY in July. That quite rapid compared with historical standards in Japan. And the details are reasonably strong too, in the sense that regular wages are rising – so it isn't all about bonuses and overtime pay – and full-time positions are rising relative to part-time.

The big problem, of course, is while 2% is a relatively rapid rate for nominal wages to be rising, it still isn't enough to keep up with CPI inflation. As a result, real wages are falling. That isn't good news for the macroeconomy. Nominal wages need to rise more quickly yet, which is unlikely to happen without the labour market tightening.

The last labour market release did suggest that this might be starting to happen; it was also notable that despite high inflation expectations, consumer sentiment bounced in August. It would be misleading to read too much into data from one month, but if they persist, these shifts will be important.