- Marcel Theliant, Capital Economics
Wages in Japan increased at their fastest pace since 1997, helping consumers cope with rising living costs as Prime Minister Shinzo Abe attempts to revive growth in the world's third biggest economy. Average monthly earnings soared as much as 2.6% from the previous year following the 1% gain in June on the back of a rise in the manufacturing and construction sectors, according to the labour ministry. However, adjusted to inflation, pay shrank 1.4%, marking the 13th month of drops in a row. The figure is a positive sign for Prime Minister Shinzo Abe following a slew of recent weak production and consumption figures. Japanese manufacturing activity expanded in August at a slightly slower pace than initially estimated. The final Markit/JMMA Manufacturing PMI came at a seasonally adjusted 52.2 compared with the preliminary reading of 52.4 and a final 50.5 in July. Economists have blamed an April sales tax hike for cooling consumer sentiment as wage growth has thus far not kept up with price rises.
Separately, a data earlier this week showed Japanese companies lowered capital spending in the second quarter, indicating the first sales tax hike in 17 years curtailed demand. The quarterly 1.8% decline in capex suggests revised data will likely confirm the Japanese economy's deepest contraction since March 2011.
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