Japanese wages fall again in September, a setback for Abenomics

Is Abenomics working? For Japanese Prime Minister Shinzo Abe, there were early signs of success for his economic recovery plan: The yen started to fall, for instance, while the stock market began to rise. Economic growth for the second quarter came in at a healthy 3.8 percent, and the trade ministry today said industrial production is likely to show month-on-month growth of 4.7 percent in October.

The key breakthrough in the long war against deflation, though, will come with growth in wages, as more income will translate into greater willingness of Japanese consumers to spend. The prime minister told lawmakers this month that his goal is to create a “virtuous circle” of rising wages and employment that leads to greater consumption and investment. As part of the campaign to lift wages, Abe’s government last month even started talks with business and union leaders. “The key for the success of Abenomics is whether companies will raise wages,” Norio Miyagawa, a senior economist at Mizuho Securities Research & Consulting in Tokyo, told Bloomberg News.

By that measure, today was a setback for Abe. Despite his use of the bully pulpit, wages are still falling. According to the Japanese labor ministry, regular wages (excluding overtime and bonuses) fell yet again in September, dropping 0.3 percent. “Companies still aren’t confident enough that growth will be sustained and will probably hesitate to raise wages, especially base salaries, for the time being,” Miyagawa said.

The news wasn’t all bad. The housing market is rebounding, as starts in September increased 19.4 percent from a year earlier, the government announced today. That’s better than the median 12 percent expected by two dozen analysts surveyed by Bloomberg and marks the 13th straight month of improvement.