Japan July bonuses rise, bode well for “Abenomics”

Japan July bonuses rise, bode well for “Abenomics”

TOKYO - Japanese summer bonuses rose in July from a year earlier, government data showed, boding well for personal consumption and adding to signs the benefits of Prime Minister Shinzo Abe's reflationary policies are broadening.

Wage earners' special payments, which are predominantly summer bonuses, rose 2.1 per cent in July from a year earlier, data from the labour ministry showed on Tuesday.

That followed a revised 2.1 per cent gain in June, suggesting that companies are now confident enough about the economic outlook to pass on some of their rising revenues to employees.

The rise in bonuses will be encouraging to Abe, who hopes his "Abenomics" policy prescription of aggressive monetary and fiscal stimulus and pro-growth reforms will create a virtuous circle of consumption, bigger corporate profits, investment and higher wages that ultimately revitalises growth.

The Bank of Japan considers wage growth as crucial in its battle to beat deflation and meet its pledge of achieving 2 per cent inflation in roughly two years. It is widely expected to keep monetary policy steady this week following its April launch of a massive stimulus programme.

Tuesday's wages report joins a recent run of positive data that could strengthen the case for the government to go ahead with a scheduled two-stage hike in the sales tax from next year.

However, there are some concerns that raising the tax may undermine the economic recovery before it is fully entrenched, and policymakers are mindful of pockets of weakness in the economy.

Wage earners' total cash earnings grew 0.4 per cent in July after a 0.6 per cent increase in June. But regular pay continued to fall, the data showed, suggesting that a sustained rise in wages is far from assured.

Nonetheless, the steady drip of positive economic news strengthens Abe's hand as he moves to tackle structural reforms to pull the world's third-largest economy out of nearly two decades of stagnation.

Japanese companies typically pay summer bonuses in June and July, which fall under "special payments" under the labour ministry's wage data. The ministry will issue official summer bonus payment figures in September.

Due to persistent deflation and stagnant growth, summer bonuses in Japan declined for two straight years to 2012 and year-end bonuses slid for four years in a row.

Overtime pay, a barometre of strength in corporate activity, rose 1.9 per cent in the year to July, increasing for the fourth straight month, the data showed.

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