Pay for Japanese Workers Jumps in August as Bonuses Pick Up

(Bloomberg) -- Pay for Japanese workers showed the strongest gains this year in August, according to data from the labor ministry. It's welcome news for economic policy makers in Tokyo who are struggling to spur sustained inflation in the world's third-largest economy.

Monthly cash earnings increased 0.9 percent from a year earlier, the largest amount in more than a year, and higher than the 0.5 percent estimated by economists. That marked a rebound from a 0.6 percent drop in July, when companies cut bonus payments. Cash earnings adjusted for inflation grew 0.1 percent after a 1.1 percent drop the previous month.

Japan is in need of pay increases to boost both inflation and household consumption. The labor market is the tightest it has been in decades, but wages have inched up only slowly. Part-time workers have seen a bit more improvement in wages, but fewer working hours has meant less improvement in their take-home pay.

Strong corporate profits are being reflected in bonuses, which saw a 6.1 percent increase, said Junko Nishioka, chief economist at Sumitomo Mitsui Banking Corporation. However, the increases are still short of what the Bank of Japan would like. "In the sense that wages are connected to people's inflation expectations, they can't at all be satisfied," she said.

Read more: Decoding key wage indicators in Japan.

To contact the reporter on this story: Connor Cislo in Tokyo at ccislo@bloomberg.net.

To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net, Henry Hoenig