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Japanese Wages Fall for 13 Consecutive Months, Prompting BOJ to Encourage Monetary Easing

Tokyo, Japan – Real wages in Japan experienced a 3 percent decline in April, marking the 13th consecutive month of decreases, according to the Ministry of Internal Affairs and Communications. The ongoing slump in wages indicates a slowdown in wage recovery within the country, coinciding with a rise in consumer spending inflation, particularly in commodity and energy prices following the conflict between Russia and Ukraine.

The persistently falling wages have led financial markets to anticipate that the Bank of Japan (BOJ) will continue its policy of ultraloose monetary measures. This forecast has provided support to the Nikkei, with the market closing at its highest level since July 1990 during morning trading.

Notably, household spending also took a hit, dropping by 4.4 percent in April compared to the previous year. This decline marks the second consecutive month of contraction and represents the most significant fall since February 2021. The reduction in spending is attributed to people cutting back on education and food expenses amid rising product prices.

Education spending, including supplementary education, saw a substantial decrease of 19.5 percent in April compared to the previous year. Similarly, food spending dropped by 1.1 percent, with seafood purchases experiencing an even sharper decline of 8.7 percent due to the effects of inflation.

In contrast, there has been a noticeable improvement in spending on travel and dining out. The relaxation of COVID-19 control measures by the government has led to a surge of 4.6 percent in recreation and leisure expenditures.

Household spending serves as a key indicator of private consumption, accounting for over half of Japan’s gross domestic product (GDP). As wages continue to decline, there are concerns about the impact on consumer spending and its potential implications for the broader economy.

Given the persistent wage decline and its implications, the BOJ is expected to maintain its stance on monetary easing, striving to support economic recovery and mitigate the challenges posed by the current economic climate.

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