Pay rises not enough to boost spending?

March 16, 2007
By Ken Worsley

The International Herald Tribune has picked up a Bloomberg piece entitled “Spending may not keep pace with pay rises in Japan.”

The article quotes Yasuo Yamamoto, a senior economist at Mizuho Research Institute in Tokyo, who asserts that increases in wages and bonuses “will provide some boost for consumption, but the impact will probably be limited.” Yamamoto sees the pay rises as being modest and the increases in bonuses having a limited effect due to the fact that they are only paid out to full-time salaried workers.

2006 pay rises barely had any effect on consumer spending, which remained almost unchanged over the past year. As Bloomberg puts it:

Cash earnings fell at the fastest pace in 16 months in December as companies paid lower winter bonuses. For the year, workers brought home an extra ¥5,500 in total pay.

Consumer spending accounts for over half of the Japanese economy.

Filed Under Consumer Spending, Labor and Wages