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Title: Japan's wage growth to lag inflation over next 12 months

Aug 26, 2022 12:21AM ET

By: AnalysisWatch

According to almost 80% of economists surveyed by Reuters, wages in Japan are unlikely to rise as much as consumer prices in the country next year, which would be bad news for an economy that has seen almost no real wage growth in more than two decades.

The prospect of nominal wage growth lagging behind price increases raises the risk that households will tighten their belts, further damaging the economy.

According to OECD data, average wages in Japan have barely risen since the early 1990s and last year were the lowest in the Group of Seven economies.

This is despite some signs of wage increases as a rapidly ageing population deepens labor shortages and unions may step up their demands for ever larger wage increases next year.

Nine out of 26 economists said nominal wages in Japan are very unlikely to exceed the general annual rate of inflation over the next 12 months.

The country's headline inflation rate last hit a near eight-year high of 2.6 percent in July and held above 2 percent for four straight months through July, supported by rising global fuel and commodity prices.

Japan's economy is now expected to grow at a 2.0% annual rate in the three months through September, according to the median forecast of 38 economists in the August 15–24 survey, down from the 3.1% forecast in the July survey.

Heightened fears of a global growth slowdown, driven in part by the fallout in Europe from Russia's war in Ukraine, are also making analysts increasingly pessimistic about the outlook for the Japanese economy.

The government said the economy grew at a 2.2% annual rate in the April-June period, below average market forecasts for 2.5% growth.

The economy will grow 1.7 percent this fiscal year, followed by an expected 1.3 percent growth in fiscal 2023, the survey showed, both lower than higher forecasts in July.

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