Rises in Japanese Employment and Wages: Good Omens for Japanese Consumer Incomes and Spending

While the number of employed persons in Japan declined 0.26% in June from May to 64.18 million on a seasonally unadjusted basis, it was 0.69% above the June, 2004 figure. The number of unemployed persons declined by 8.8% in May to June and was 9.4% below June, 2004. As a result, the unemployment rate is now 4.2% compared with 4.6% in May, 2005 and also in June, 2004.

June also saw a year-to-year rise in Japanese wages. The average monthly cash wage in Japan amounted to 467,814 Yen or $4,156 at the current rate of exchange. The granting of bonuses in June and December distorts the month to month changes in the wage data that are available only on a not seasonally adjusted basis. The year to year changes are the more meaningful comparisons. In June, cash wages were almost 0.7% above the comparable figure of last year.

Cash Earnings are equal to money earned before deductions for income tax, social insurance contribution, union dues and payment for good purchased, etc. In the Haver Data Base for Japan there is a breakdown of cash earnings. Total cash earnings consist of Contractual Cash Earnings and Bonuses. Contractual Cash Earnings, in turn are the sum of Scheduled Cash Earnings and Overtime Earnings, which include, in addition to over-time payments, other special payments, such as marriage allowances, etc.

In the attached chart we show the year-to-year changes in the Scheduled Cash Earnings and Overtime Earnings. Scheduled cash earnings have shown year-to-year increases in April, May and June of this year, the first increases since April, 2003. Overtime earnings, on the other hand have shown year-to-year increases since mid 2002 and in June were 2.4% above the comparable figure for last year.

Rising employment and wages should augur well for Japanese consumer incomes and spending.