When it comes to Japanese wage data, that weakest link of Abenomics simply because real wages haven’t grown in 24 consecutive months – and without wage growth no economy can ever possibly groq – there is little to add to what we said previously: all the data is not only fabricated, but manipulated to comply with policy. Recall our post from April in which we exposed just how Japan’s Monthly Labor Survey adjusted all historical data so that the “rising” wages into Japan’s election were subsequently revealed to be a lie and in fact Japan never had a single month of rising base wages in 2014!
Since then the Japanese department of data fabrication has gone “full Chinese” and last month, the wage data was presented as the long overdue “smashing success” for Abenomics, as it was the first month in two years when real wages posted a meager 0.1% increase.
Unfortunately, just a few weeks later that 0.1% increase was promptly adjusted down to an unchanged 0.0%, thereby confirming not only that Abenomics remains a failure but that no Japanese wage data is even modestly credibly.
And then, last night, we got the latest data for the month of July which was an absolute disaster.
The ministry of health and labor reported that total average monthly cash earnings per regular employee in Japan for June stood at Y425,727, plunging 2.4% from a year earlier and posting the first year-on-year drop in seven months after +0.7% in May, which was distorted by irregular summer bonus payment patterns.
Bonuses and other special pay slumped 6.5% on year for the first drop in eight months after +25.2% in May. But base wages, the key to a recovery in cash earnings, rose 0.4% on year in June for the fourth straight rise. Overtime pay fell 0.4% for the fourth straight drop, indicating a GDP slump in the April-June quarter.
Not surprisingly, the fall in bonuses in June was attributed to an increase in entities that paid bonuses early in May at businesses with more than 30 employees where payments are large and a decline in businesses that paid bonuses in June compared with last year (ratio of businesses paying in June: 37.7%, June 2014: 41.9%).
In other words, as Abe pushes more and more companies to compensate for soaring import costs with higher bonuses, companies have simply slashed the number of bonuses paid out by 10% in one years! And it’s only going to get worse, with the Federation of Economic Organizations’ (Keidanren) summer bonus survey showing a sharp slowdown in bonuses this year to +2.8% from +7.2% last year, excessive expectations are unwarranted.
The punchline: all important real wages, even those including bonuses and special payments, once again failed to keep up with inflation, and in June crashed by a whopping 2.9% reflecting a 0.5% yoy increase in the CPI excluding imputed rent. As the chart below shows, there has now been 24 consecutive months without a single Y/Y monthly increase in real wages (we fully expect May’s unchanged print to be revised negative in the final report).
What’s worse is that when one adjusts the inflationary surge from the consumption tax hike last April, which has now been fully anniversaried and is no longer part of the base effect, this was the largest decline in Japan’s real wages since December 2009, or the biggest monthly plunge in 6 years!
The irony here is that even as Abenomics is pushing Japan’s economy ever deeper into total ruin, overnight an economic adviser to Japan’s prime minister said that he saw no need for the Bank of Japan to deploy additional stimulus to meet its 2 percent inflation goal next year, warning that it could cause the yen to weaken and prices to overshoot.
Quoted by Reuters, Etsuro Honda, special adviser to the Cabinet and a leading architect of Prime Minister Shinzo Abe’s reflationary economic policy, told Reuters in an interview that the next step for the central bank could be to taper its massive asset purchases.
So tapering Japan’s QQE just as the Japanese consumer has not been weaker in 6 years (a state for which the BOJ takes all the blame).
Back to the real deterioration in Japan’s economy, Market News reminds us that many firms are still using lower-paid part-time and contract workers as a buffer against business cycles. And a big reason for the ongoing weakness in wages is that just like in the US, the number of full-time employees rose 1.5% on year in June after +1.4% in May while the number of part-time workers gained 3.4% in June after +3.5% in May.
We already covered all this previously in “This Is What Keynesian “Success” Looks Like: Soaring Part-Time Jobs, Record Low Real Wages” when we showed how Japan, like the US, is becoming a nation of part-time workers…
… consisting of “senior citizens and housewives”
With Abenomics solely to blame for the collapse in real wages which are now at a record low indexed level:
We leave the conclusion to MarketNews:
The economy is widely expected to have contracted in the April-June (preliminary Q2 GDP due out on Aug. 17) but is forecast to rebound in the July-September quarter, which should support a modest improvement in nominal wages. But it takes time to push up wages above inflation, which is keeping consumption weak.The long decline in real wages, which has been on a general downtrend in the past four years, has hurt the average household income as the cost of living has been pushed up by high import costs and the sales tax hike last year.
So another Keynesian success. And by success we of course mean complete failure.
But how is it possible that Japan could singlehandedly destroy its economy? We wondered long and hard, and then we remembered that it was never alone.
At that point everything falls into place.