The Difference Between Nominal And Real, In One Chart Courtesy Of Japan

Tyler Durden's picture

For about three years, or just before the terminal Keynesian/monetarist experiment of Abenomics was launched, Japanese wages were flatlining, happily hugging the 0% Y/Y line. But that was ok, because the country had deflation or at best 0% inflation, meaning quite often real wages, adjusted for actual purchasing power, were higher than nominal wages. Then, following Abe's triumphal return after a 4 year battle with diarrhea, when he unleashed a different kind of liquidity, one impacting the BOJ's CTRL-P function, after much cajoling, threats and outright incantations, Japan's nominal wages started to slowly rise higher, and as reported earlier following the latest battery of worse than expected news out of a recessionary Japan, nominal wages in August rose by 1.4%, down from 2.4% in July, driven by overtime wages which rose 1.8% (with base wages barely eeking out a 0.6% annual rise), however also at half the Y/Y rate seen in July.

What about real wages, or wages when factoring in the soaring prices of, well, everything such as TV sets rising in price by double digits (yes, in the country that gave the world Sony), or gas and heating prices through the roof for nearly 2 years now. Sadly, here the picture is far worse. Because while the nominal wage increase is welcome, if declining, the real wage crash is quite horrifying to some 100+ million Japanese. And accelerating, because while real wages dropped -1.7% in July, in August they flat out crashed by -2.6%.

In fact, even as the great Keynesian priests of Japan distract the world by pointing out repeatedly the modest and now declining rise in nominal wages, as testament of the "success"of Abenomics, what they want everyone to ignore is what is going on with real wages.

So, without further ado, here is the difference between Nominal and Real wages, as demonstrates best by that sinking Keynesian titanic, which has already returned to recession as confirmed by the upcoming negative GDP print, Japan.

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SAT 800's picture

That Kyle Bass is a sharp cookie, isn't he? When can we have another interview with him Tyler? I think he's got behind the green curtain there in Japan, pretty well; they're not putting much past that boy. Poor fucking Japanese; killed me old dad, they did, and for what ? a lot of dark ages nonsense about emperors and world warriors and what not. Maybe there really is Karma, eh? Wouldn't that be a bitch? Hope I live to see it; I really do.

NidStyles's picture

Yes, let's keep blaming those kids for the sin's of their grandfathers, because that is the right thing to do....

SAT 800's picture

Important lesson there for all those Americans with their stock market retirement accounts. Better start reckoning up the difference between nominal and real; cause inflation's not going away anytime soon.

Debugas's picture

i wonder how inflation was calculated here ?

"TV sets rising in price by double digits" - i do not own and do not watch TV at all

XAU XAG's picture

This chart is a good representation of all western economies wages.



They are not getting the taxes they hoped as peeps are earning less and less as real needs keep increasing.


At some stage they will TAKE your wealth for the good of the country (banks)...........


When you think about deflation, who would not want lower prices??


The debt lenders and those in debt, money is not evil but debt is.


RiverRoad's picture

And good luck to them when they take our wealth.....our de facto debased paper fiat.  They can take it and shove it.

abenomicstimebomb's picture

Abe v2.0 will leave office the same way he left the last time.  Look for a return of that other kind of liquidity, perhaps of a projectile nature.  Hopefully televised live in front of Kuroda-san.  

buzzsaw99's picture

central bankers love low wages and high stock options

jubber's picture

Nikkei futures back above 16200

Last of the Middle Class's picture

If you don't accurately factor in inflation or even deflation everything else is bullshit. You can damn well be sure Abe isn't going to let that real number come out as it would lead to an understanding of his senseless economic game.

AdvancingTime's picture

 It is clear that the prospects for Japan are lousy. The writing is on the wall. Japan is facing a wall of debt that can only be addressed by printing more money and debasing their currency. This means paying off their debt with worthless yen where possible and in many cases defaulting on promises made. Japan's public debt, which stands at around 230% of its GDP and is the highest in the industrialized world.

The moment the Japaneses stock market fails to rise enough to offset inflation and realizes even a weaker yen will not help we will see a tsunami of money fleeing Japan. This will constitute the end of the line for those left holding both JGBs and the yen. This has been a long time coming and I contend the cross-border flow of money leaving Japan is why some stock markets have remained so resilient . When Japan crumbles it will be felt across the world. More on this subject in the article below.

yogibear's picture

The Federal Reserve PhDs get to see their grand Keynesian printing experiment blow up first with Japan, then later with the US.

Not Goldman Sachs's picture

Abe should do the right thing...fall on his sword.


ersatz007's picture

One doesn't don't just fall on one's sword; one is supposed to do some digging around in there first; i.e., disembowling.  like the economy. 

NeedleDickTheBugFucker's picture

Too bad the masses around the world don't understand the difference (it's not just Japan) and won't until it's too late.

d edwards's picture



Nominal: what the gov't wants you to believe.


Real: the truth.

yogibear's picture

Lower and lower wages relative to inflation , higher and higher profits and stock prices. It's all that seems to matter.

Caveman93's picture

"Keynesian Godzilla"

numapepi's picture

It isn't all that hard to understand why governments love and are unwilling to give up Keynesian principles. Keynesian economics is like telling a heroin addict his problem is that he doesn't take enough heroin. It may be what he wants to hear; but it isn't what he needs to hear.

Hayak and Mises on the other hand...