Japanese Wages Slump Record 7.1% as Companies Slash Bonuses

Japan’s wages fell at the fastest pace on record in June as companies cut bonuses to protect dwindling profits, adding to evidence that consumers are unlikely to contribute to an economic recovery.

Monthly wages including overtime and bonuses dropped 7.1 percent from a year earlier to 430,620 yen ($4,500), the sharpest decline since the survey began in 1990, the Labor Ministry said today in Tokyo. Bonuses shrank 14.5 percent.

Companies from Sharp Corp. to Sony Corp. are posting losses amid the country’s worst postwar recession. The unemployment rate rose to a six-year high of 5.4 percent in June, weighing on households, whose outlays account for more than half of the economy.

“Japan’s recovery will be very weak because it won’t get any support from consumer spending,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “The pressure for wage cuts is strong and it’ll get even stronger as companies face excesses” of labor and production, he said.

The decline in paychecks was the 13th in a row, the longest losing streak in six years, underscoring concern that deflation may again be taking hold in the world’s second- largest economy. Consumer prices excluding fresh food slid a record 1.7 percent in June from a year earlier.

Summer bonuses in Japan are typically paid in June or July and represent about 10 percent of a fulltime worker’s annual income.

More Overtime

Employees were at least able to work more overtime in June as companies increased output to replenish inventories and meet a pickup in overseas demand. Overtime hours among manufacturers rose in June from May, the third monthly gain, the report said.

Industrial production surged 8.3 percent last quarter from the first three months of 2009, the biggest jump since 1953. Exports gained in June from a month earlier.

“Exports and production bottomed out in February, but as long as cost-cutting pressure remains intact, it is hard to see non-manufacturers and households entering a process of self- sustained recovery,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo.

Sharp, Japan’s largest maker of liquid-crystal displays, last week reported a third straight quarterly loss on slumping sales of LCD panels. Sony, which is cutting 16,000 staff worldwide, posted its second loss in a row.

Japanese are crimping on travel this summer. The average vacation budget dropped 18 percent from last year to 88,000 yen a person, the lowest in four years, Dentsu Research Inc. reported last week. The number of Japanese tourists will fall 1.7 percent, JTB Corp., the nation’s largest travel agency, said last month.