"Raising wages is essential for Japan's sustainable economic recovery. It won't be easy for manufacturing companies to raise base pay as they are competing globally."
- Hidenori Suezawa, a financial-market and fiscal analyst at SMBC Nikko Securities Inc.
Shinzo Abe and Haruhiko Kuroda will do whatever it takes to boost inflation in the world's third largest economy and promote economic growth. So far Abenomics have been working, as the core inflation advanced 0.3% on a monthly basis and 0.9% from a year earlier, posting the fifth consecutive increase. And even though government measures are contributing to growth, on the other side of the coin, there are some disadvantages of these actions.
Japanese salaries extended the longest drop since 2010, as regular wages, excluding bonuses and overtime, plunged 0.4% in October from the same month a year earlier, posting 17th straight decline, while the total cash earnings inched higher by just 0.1%. A further decline in wages threatens living standards, as households face the prospect of higher inflationary pressure on top of a sales-tax hike in April. While weaker Yen is helping manufacturers, increasing their profits, the focus is now turning to salary talks that may derail the economy, adding more pressure on Shinzo Abe's bid to reflate Japanese economy.
Businesses' profits rocketed more than 24% in the third quarter, the most in almost three years, but the companies are still reluctant to increase payment.
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