The Yen is crashing.
Japanese Real Wages Decline For Record 16 Consecutive Months
The Yen is crashing
Image Credits: Jon Wick / Flickr
by Zero Hedge |
December 2, 2014
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.
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.
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, “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. Is there any doubt that Japan is now an
economic basket case, with an unsustainable demographic implosion to
boot?
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