Wage rises in Japan to be slow in 2007 -economists http://today.reuters.com/news/articleinvesting.aspx?type=economicNews&storyID=2007-01-31T093526Z_01_T240585_RTRIDST_0_JAPAN-ECONOMY-WAGES-OUTLOOK.XML
Wed Jan 31, 2007
By Akiko Ishiwata
TOKYO, Jan 31 (Reuters) - Japanese workers' wages are likely to rise only slowly for most of this year despite a long-running economic recovery as companies remain keen to control labour costs, economists said on Wednesday. Wages are a key factor in determining trends in prices and personal demand. Markets have been watching them keenly since the Bank of Japan cited softness in consumer prices and consumption as a reason for not raising interest rates in December and January.
Weak wage data released on Wednesday supported Japanese government bond futures prices as the market further scaled back expectations of a rate hike next month. March 10-year JGB futures <2JGBv1> ended up 10 basis points on the day at 134.51.
Japanese wage earners' total cash earnings fell 0.6 percent in December from a year ago, government data showed, marking the first decline in four months.
"The data presents a strong headwind for those who speculate on another rate hike in February," said Yasunari Ueno, chief market economist at Mizuho Securities.
Economists say the rise in wages is slow because companies are strongly inclined to control labour costs, although they are eager to hire new employees.
One BOJ official said there is a view within the central bank that a rising trend in wages will become apparent in April and the central bank is watching to see if wage gains push up prices enough to offset the negative impact of lower oil prices.
Many economists think the pace of gains in wages will pick up later than the BOJ's view, based on their job-market assessments.
Yoshihiko Yuki, economist at Dai-Ichi Life Research Institute, said further tightening in the job market after the end of 2007 will likely put upward pressure on wages.
Government data released on Tuesday provided mixed signals about job conditions.
The jobless rate in December rose to 4.1 percent from 4.0 in November, while the jobs-to-applicants ratio improved to 1.08 from 1.06 in November, meaning 108 jobs were available for each 100 applicants.
Junichi Makino, senior economist at Daiwa Institute of Research, is a little more cautious than Yuki on the outlook for the job market. "The jobs-to-applicants ratio seems to be peaking out. It suggests a slowdown in job growth in the future," he said.
For wages to clearly turn to a rising trend, Makino said, the unemployment rate needs to fall to around 3.5 percent.
"It (a 3.5 percent jobless rate) requires GDP to grow 2 percent for the next one and a half years," Makino said. "If that's achieved, wages will rise from around the spring of 2008."
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