Japanese wages in record plunge

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Japanese wages in record plunge

Japan's wages fell at the fastest pace on record in June as companies cut bonuses to protect dwindling profits, adding to evidence that consumers are unlikely to contribute to an economic recovery.

Monthly wages including overtime and bonuses dropped 7.1 per cent from a year earlier to 430,620 yen ($5400), the sharpest decline since the survey began in 1990, the Labor Ministry said today in Tokyo. Bonuses shrank 14.5 percent.

Companies from Sharp to Sony are posting losses amid the country's worst postwar recession. The unemployment rate rose to a six-year high of 5.4 per cent in June, weighing on households, whose outlays account for more than half of the economy.

''Japan's recovery will be very weak because it won't get any support from consumer spending,'' said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance in Tokyo. ''The pressure for wage cuts is strong and it'll get even stronger as companies face excesses'' of labor and production, he said.

The decline in paychecks was the 13th in a row, the longest losing streak in six years, underscoring concern that deflation may again be taking hold in the world's second- largest economy. Consumer prices excluding fresh food slid a record 1.7 per cent in June from a year earlier.

Summer bonuses in Japan are typically paid in June or July and represent about 10 per cent of a fulltime worker's annual income.

Employees were at least able to work more overtime in June as companies increased output to replenish inventories and meet a pickup in overseas demand. Overtime hours among manufacturers rose in June from May, the third monthly gain, the report said.

Industrial production surged 8.3 per cent last quarter from the first three months of 2009, the biggest jump since 1953. Exports gained in June from a month earlier.

''Exports and production bottomed out in February, but as long as cost-cutting pressure remains intact, it is hard to see non-manufacturers and households entering a process of self- sustained recovery,'' said Kyohei Morita, chief economist at Barclays Capital in Tokyo.

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Sharp, Japan's largest maker of liquid-crystal displays, last week reported a third straight quarterly loss on slumping sales of LCD panels. Sony, which is cutting 16,000 staff worldwide, posted its second loss in a row.

Japanese are crimping on travel this summer. The average vacation budget dropped 18 per cent from last year to 88,000 yen a person, the lowest in four years, Dentsu Research Inc. reported last week. The number of Japanese tourists will fall 1.7 per cent, JTB Corp., the nation's largest travel agency, said last month.

Bloomberg News

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