Japans Wage Growth makes Biggest Surge since 1997

Japan’s household spending fell for the fifth straight month in June but wages for Japanese workers took a big leap and rose at their fastest pace in more than 21 years, boosted by large summer bonuses.

Household income also marked the fastest gain in three years on growths of temporary workers’ pay, offering some hope for Bank of Japan policymakers struggling to hasten inflation to their 2% target.

According to Reuters, Household spending fell 1.2% in June from a year earlier, marking the fifth straight month of declines. The fall was smaller than forecasts of a 1.6% slide and a 3.9% drop in May.

Households’ inflation-adjusted income increased 4.4% in June, the largest increase since July 2015.

Workers’ real wages increased 2.8% in June from the year earlier, accelerating from a 1.3% increase in May and making it the quickest pace growth since January 1997.

Private consumption has been weakness in the economy as slow wage growth prevents households from releasing their purse strings, in turn discouraging companies from increasing prices and keeping inflation far from the Bank of Japan’s 2% target.

Even though companies now are finally raising wages to tackle a tight job market, their business views could be clouded by increasing protectionism and fears the U.S. may impose auto import tariffs that would disrupt Japan’s exports.

Analysts warned that growth may be peaking for Japan’s economy, which had enjoyed the longest streak of expansion since the 1980s economy before shrinking in January-March.

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