Japan labor cash earnings rise above expectations in July, unlikely to offer policy relief to the BoJ

Japan’s labor cash earnings rose for the second straight month during July, at a pace faster-than-expected and staying above what markets had initially anticipated. However, the increase in base wages is unlikely to offer any policy relief to the Bank of Japan in its monetary policy meeting scheduled on September 21.

Total labor cash earnings in Japan grew for the second straight month in July, and at a faster-than-expected pace, data released in a preliminary report from the Ministry of Health, Labor and Welfare showed Monday. Gross earnings climbed at a stable pace of 1.4 percent year-over-year in July, exceeding economists' forecast for a 0.4 percent rise.

Also, contractual earnings increased 0.3 percent on year, after showing no variations in the previous month. Special cash earnings rose at a faster pace of 4.2 percent in July, following a 3.6 percent gain. At the same time, annual growth in total real cash earnings held steady at 2.0 percent in July. That was also above the 0.7 percent increase expected by economists.

Average monthly base pay, excluding overtime and bonuses, rose 0.4 percent in July from a year earlier to JPY241,518 (USD2,326), the labor ministry report added. That was the first increase since March.

Higher wages are key to Prime Minister Shinzo Abe’s economic program, which aims at "reflating" Japan’s economy through a cycle of higher corporate profits, rising pay and stronger consumer spending, Bloomberg reported.

Meanwhile, the strong and gradual appreciation in the Japanese yen has hurt export earnings, creating deflationary pressures and lowering the costs of imported goods.