Japan’s labour market is, on the surface, incredibly strong right now.
The national unemployment rate sits at just 3.1% while the jobs-to-applicants ratio — simply the number of jobs available compared to those seeking work — now stands at the highest level since February 1974.
Despite those mind-boggling figures, the envy to many nation’s around the world, the one missing piece of the puzzle is wages growth.
There’s been no sign of an acceleration, confounding the traditional view that tight labour market conditions should translate to faster wage growth.
According to data from Japan’s labour ministry released today, regular worker pay rose by 0.9% in May from a year earlier, the fastest increase since March 2000.
Taking into account inflation, real wages increased by 0.1% over the same period, following a flat reading in April.
It was the first positive reading in five months.
Overtime pay also increased by 0.7% from a year earlier, the biggest increase in 13 months.
While still well below the pay increases seen in other developed nations, the recent acceleration provides tentative evidence that tight labour market conditions and an improvement in the broader Japanese economy may be starting to filter through to faster wage growth.
The Bank of Japan will be hoping that it is with core-inflation currently sitting at just 0.4%, well below it’s 2% target.