Japan's Real Wages Just Plunged The Most In Six Years

Tyler Durden's picture

When it comes to Japanese wage data, that weakest link of Abenomics simply because real wages haven't grown in 24 consecutive months - and without wage growth no economy can ever possibly groq - there is little to add to what we said previously: all the data is not only fabricated, but manipulated to comply with policy. Recall our post from April in which we exposed just how Japan's Monthly Labor Survey adjusted all historical data so that the "rising" wages into Japan's election were subsequently revealed to be a lie and in fact Japan never had a single month of rising base wages in 2014!


Since then the Japanese department of data fabrication has gone "full Chinese" and last month, the wage data was presented as the long overdue "smashing success" for Abenomics, as it was the first month in two years when real wages posted a meager 0.1% increase.

Unfortunately, just a few weeks later that 0.1% increase was promptly adjusted down to an unchanged 0.0%, thereby confirming not only that Abenomics remains a failure but that no Japanese wage data is even modestly credibly.

And then, last night, we got the latest data for the month of July which was an absolute disaster.

The ministry of health and labor reported that total average monthly cash earnings per regular employee in Japan for June stood at Y425,727, plunging 2.4% from a year earlier and posting the first year-on-year drop in seven months after +0.7% in May, which was distorted by irregular summer bonus payment patterns.

Bonuses and other special pay slumped 6.5% on year for the first drop in eight months after +25.2% in May. But base wages, the key to a recovery in cash earnings, rose 0.4% on year in June for the fourth straight rise. Overtime pay fell 0.4% for the fourth straight drop, indicating a GDP slump in the April-June quarter.

Not surprisingly, the fall in bonuses in June was attributed to an increase in entities that paid bonuses early in May at businesses with more than 30 employees where payments are large and a decline in businesses that paid bonuses in June compared with last year (ratio of businesses paying in June: 37.7%, June 2014: 41.9%).

In other words, as Abe pushes more and more companies to compensate for soaring import costs with higher bonuses, companies have simply slashed the number of bonuses paid out by 10% in one years! And it's only going to get worse, with the Federation of Economic Organizations’ (Keidanren) summer bonus survey showing a sharp slowdown in bonuses this year to +2.8% from +7.2% last year, excessive expectations are unwarranted.

The punchline: all important real wages, even those including bonuses and special payments, once again failed to keep up with inflation, and in June crashed by a whopping 2.9% reflecting a 0.5% yoy increase in the CPI excluding imputed rent. As the chart below shows, there has now been 24 consecutive months without a single Y/Y monthly increase in real wages (we fully expect May's unchanged print to be revised negative in the final report).

What's worse is that when one adjusts the inflationary surge from the consumption tax hike last April, which has now been fully anniversaried and is no longer part of the base effect, this was the largest decline in Japan's real wages since December 2009, or the biggest monthly plunge in 6 years!

The irony here is that even as Abenomics is pushing Japan's economy ever deeper into total ruin, overnight an economic adviser to Japan's prime minister said that he saw no need for the Bank of Japan to deploy additional stimulus to meet its 2 percent inflation goal next year, warning that it could cause the yen to weaken and prices to overshoot.

Quoted by Reuters, Etsuro Honda, special adviser to the Cabinet and a leading architect of Prime Minister Shinzo Abe's reflationary economic policy, told Reuters in an interview that the next step for the central bank could be to taper its massive asset purchases.

So tapering Japan's QQE just as the Japanese consumer has not been weaker in 6 years (a state for which the BOJ takes all the blame).

Back to the real deterioration in Japan's economy, Market News reminds us that many firms are still using lower-paid part-time and contract workers as a buffer against business cycles. And a big reason for the ongoing weakness in wages is that just like in the US, the number of full-time employees rose 1.5% on year in June after +1.4% in May while the number of part-time workers gained 3.4% in June after +3.5% in May.

We already covered all this previously in "This Is What Keynesian "Success" Looks Like: Soaring Part-Time Jobs, Record Low Real Wages" when we showed how Japan, like the US, is becoming a nation of part-time workers...

... consisting of "senior citizens and housewives"

With Abenomics solely to blame for the collapse in real wages which are now at a record low indexed level:

We leave the conclusion to MarketNews:

The economy is widely expected to have contracted in the April-June (preliminary Q2 GDP due out on Aug. 17) but is forecast to rebound in the July-September quarter, which should support a modest improvement in nominal wages. But it takes time to push up wages above inflation, which is keeping consumption weak. The long decline in real wages, which has been on a general downtrend in the past four years, has hurt the average household income as the cost of living has been pushed up by high import costs and the sales tax hike last year.

So another Keynesian success. And by success we of course mean complete failure.

But how is it possible that Japan could singlehandedly destroy its economy? We wondered long and hard, and then we remembered that it was never alone.

Recall: "And The Person Responsible For Japan's Economic Endgame Is... Paul Krugman"

At that point everything falls into place.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
KnuckleDragger-X's picture

Thank god they have a central bank to save them.....

Oh regional Indian's picture

It's really quite simple.

How can a Japan whose prosperity was built on the back of cheap nuclear energy survive without?

Forget all the other bad shit....

Japan is a basket case getting ready to go to war....closet fascist nation, sadly, much repressed rage too...a strange ally for the US too eh, given that not one century ago, fucking nukes were dropped.


Coming right up by the way, August 6th, Hiroshima... my own birth date...curious...

We'll put you in concentration camps, we'll fire and nuclear bomb the fuck out of you.... and today you'll play basebarru, eat mcdonardo, smoke maaalboro, drink piss beer.....

Rambling a bit, Japan always brings up strong feelings....such history, such craftsmanship....peerless....

And today...



starman's picture

I think 15 bucks/hour should solve their problem as well! Fuck it let's give all the Greeks 15 bucks / hour to!

onewayticket2's picture

coming to a BLS near you.....

Unknown Poster's picture

They should raise rates, so they can lower them later.

Paveway IV's picture

Japan is a great bellweather of where the U.S. is headed. Misery and more misery until a sufficiently large crisis distracts everyone for a while. The fundamentals will never get better though - they'll just keep decaying the entire time. After the crisis, more of the same with even more corruption piled on top.

Bill of Rights's picture

Governments around the world are sucking the consumer dry. Considering how smart these people claim to be you would think they would have this figured out!

robertocarlos's picture

Why don't they build Japanese cars? In Japan!

Vullsain's picture

Initially it was to circumvent US quotas initiated to prop up the bloated poorly run US auto industry.

JustObserving's picture

The good news is that Fukushima radiation will kill you early.  So who needs to save for retirement? 

Pancho de Villa's picture
Pancho de Villa (not verified) JustObserving Aug 4, 2015 8:03 PM

Only a Heartless Bastard would make a "Joke" like that!

The Delicate Genius's picture
The Delicate Genius (not verified) Aug 4, 2015 2:07 PM

Amazing how fukushima has been memory holed.

people don't understand compound interest, and that's bad

but they really don't understand radioactivity - and that's far, far worse.

Spungo's picture

How the fuck are these stupid Keynesian fucks surprised that inflation hurts the poor, and that wages never match inflation? Watch any of the dozens of documentaries about WW1. Every single country involved in the war was ravaged by inflation and was on the brink of revolution. There were strikes all over Britain because the price of everything was soaring but wages were not. Germany pretty much had a revolution, and the Kaiser was forced to flee the country. Russia's inflation was so bad that the bread shortages lead to the famous 1917 revolution, and the tsar's entire family was killed. What's the Keynesian solution to the current economic depression? Let's mimmic WW1. It worked so well a century ago!

Vullsain's picture

They are not surprised, they are not poor, they are sacrificing the working and middle class. It is essentially Welfare for the Well Off      

Gotta keep up with the OC Houswives!!

Banker Buster's picture

I'm curious if Krugman is a little scared to get on a plane going into Japan these days.  Are they going to lock him up next time he lands in Japan or are mobs of people going to ambush his Kia motorcade.  

Bunga Bunga's picture

Abenomics experiment failed, what's next?

f16hoser's picture

I wonder when the average Jap will realize that Abe works for Langley (CIA) and GS/JPM? It is so obvious a caveman can see it.

Magooo's picture

IF this continues Mr Watanabe is going to have to pimp out Mrs Watanabe

lucky and good's picture

A recent article outlined how Japan is painting itself into a corner and how this is being exacerbated by Premier Shinzo Abe giving indications of government spending out of control. Not only is the mandatory spending cap missing in his latest budget, but the draft is based on some rather optimistic economic estimates of future events.

 When looking at numbers from Japan we must remember the depreciation of the yen mechanically inflates the revenue collected abroad when converted into Japanese currency. Exports, conversely, increased at an unprecedented pace since January (+ 9.5%), to 6.5057 trillion yen (52.5 billion dollars), driven by the semiconductor and automotive sector in particular. Thus while the yen total has grown is larger in terms of volume, there was a stagnation.

This will put the Bank of Japan under even more pressure making it difficult to expand monetary stimulus if needed. Japan's options are shrinking and "any" shift in monetary policy could cause bond yields to soar and create a panic.  This is detailed in the article below.