Those seeking proof that Abenomics is working are advised to look elsewhere.
Overnight Japan released its latest, October, wage data, which showed that total cash wages rose 0.5% yoy, slightly slowing from the 0.7% growth recorded in September. As the chart below shows, Nominal wages have been slowing down from the peak in July when the figure was boosted to +2.4% on summer bonus payments. Overtime pay grew +0.4% yoy (September: +1.9%), slowing from the peak recorded in April (+6.0%) on a slowdown in economic activities. The figure contributed to overall wages by only +0.03 pp.
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Some more details from Goldman: "Basic wages rose 0.4% yoy in October, unchanged from September. The effect of the shunto spring wage hike seems to be fully reflected into base wage growth and settling at a stable growth around 0.5%. However, with overtime pay near zero, the 0.4% increase in basic wages virtually determines the overall wage growth during non-bonus months. We also note that preliminary basic wages tend to be revised down at the final stage."
Looking at nominal wages by type of employment, regular employees saw a 0.6% yoy increase, significantly slowing down from +1.1% in September. Wage for part-timers turned negative at -0.3% (September: +0.5%). Part-timers saw a sharp fall in basic working hours (-1.6% yoy) and overtime hours (-6.9% yoy).
In other words, when Japan turns to wage controls some time in 2015, a move that is now essentially assured as Japan has gone all in on central planning, it will demand that corporations boost pay to part-timers first, and then force all corporations to hike wages across the board.
But as everyone knows, for the past 2 years nominal wages are just half the story. The reason is that courtesy of the crashing Yen, everything has to be converted into real terms to adjust for soaring inflation and exploding import prices. It is here that we find that for the 16th consecutive month, real wages continued to decline heavily.
Real wages (nominal wages less the CPI inflation) continued to register a large decline of 2.8% yoy, after falling 3.0% in September. Despite high one-time bonus payments, the much lower pace of increase in basic wages (around +0.5%, conceptually close to permanent income) relative to inflation rate, and the resulting large decline in real wages at normal times, is restricting consumer behavior.
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And with Japan's snap election in less than two weeks, Abe's reign may be yet again prematurely interrupted if the local population decides it has had enough of being on the receiving end of the most cruel Keynesian experiment in recent history. As Bloomberg notes [11], "With the effect of the sales tax hike, I don’t see real wages rising in the financial year through April,” said Toru Suehiro, an economist at Mizuho Securities Co. “People will be asking themselves whether they feel better off, and there probably aren’t that many who think the economy has got better.”
Which is to be expected. After all we now know that the brain trust behind the latest Japanese push into outright lunacy, is none other than Paul Krugman [12]. Is there any doubt that Japan is now an economic basket case, with an unsustainable demographic implosion to boot?
