Japan's Wages Rise 1%, Fastest Pace in 19 Months By Toru Fujioka

March 3, 2008-- Japan's wages rose at the fastest pace in 19 months in January, a boost to consumers at a time when the economy's export-led expansion is set to slow. Monthly wages, including overtime and bonuses, climbed 1 percent from a year earlier, the most since June 2006, the Labor Ministry said in Tokyo today. Bonuses gained 12.1 percent. The increase provides relief to households whose confidence is at a four-year low as prices of gasoline, bread and noodles rise. Bank of Japan Governor Toshihiko Fukui said last month that a cycle of higher profits feeding into individual income and spending remains ``intact,'' even after wages fell in 2007. Consumer spending accounts for more than half of the economy. ``An upward trend in regular income may be the beginning of a positive story for consumer spending,'' said Kenichi Kawasaki, chief economist at Lehman Brothers Japan Inc. in Tokyo. ``What matters for consumer spending is not sentiment but wages.'' The yen traded at 103.04 per dollar at 12:41 p.m. in Tokyo from 103.17 before the report was published. Household spending increased at the quickest pace in more than three years in January and the jobless rate stayed at 3.8 percent, reports showed last week. Consumer prices excluding fresh food climbed 0.8 percent from a year earlier as companies passed on higher costs of oil, wheat and soybeans. ``The unemployment rate is still relatively low and employment growth strong,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London. ``The hard data suggest that spending is picking up.'' Small Businesses: Wages paid by small businesses rose, even as higher energy and materials costs put pressure on profits. Pay at companies with five to 29 workers climbed for the first time in more than two years. Japan's wages excluding overtime and bonuses increased 0.6 percent, a third monthly gain, the ministry said. ``This may be good news for consumers but wages are unlikely to maintain this momentum,'' said Takashi Omori, chief economist at UBS AG in Tokyo. ``Companies will probably remain cautious because of rising oil prices and the U.S. slowdown.'' The government cut its assessment of the world's second- largest economy for the first time in 15 months in February, saying growth will moderate as exports and production cool. Exports helped the longest postwar expansion accelerate to an annualized 3.7 percent last quarter. Since then, reports have shown industrial production fell the most in a year in January and shipments to the U.S. slumped for a fifth month. Bonuses Deferred: The increase in bonuses was partly the result of companies deferring payments to January from the end of last year, said Shunichi Ando, head of the Labor Ministry's statistics division. The gain may have been exaggerated because bonuses dropped 22.2 percent a year earlier, he said. ``Companies might have had difficulty paying bonuses at the end of the year,'' Ando said. ``If you look at winter bonuses overall from November, they're not strong and it's too early to be optimistic about wages.'' Bonuses dropped 2.2 percent in November from a year earlier and 3.3 percent in December. Companies in Japan pay bonuses twice a year that equate to about two months of annual salary. Average wages fell 0.7 percent in 2007, the steepest decline in three years. [From Internet]