TOKYO (Reuters) - Wages of Japanese workers fell in December at the fastest pace in five months after adjustments for inflation, in a worrying sign that consumers could cut back spending because salaries are not keeping up with the cost of goods and services.
Tepid wages suggest the government faces a difficult task in getting companies to raise wages by 3 percent or more this year at annual wage negotiations with labor unions.
The lackluster data also shows the Bank of Japan's 2 percent inflation target is likely to remain a distant goal.
Real wages fell 0.5 percent in December from the same period a year ago, labor ministry data showed on Wednesday. That followed a 0.1 percent annual increase in November and marked the biggest decline since a 1.1 percent annual decrease in July 2017.
For all of 2017, real wages fell 0.2 percent, following a 0.7 percent increase in the previous year.
Nominal cash earnings rose 0.7 percent in December from the same period a year earlier, slower than a 0.9 percent annual increase in the previous month, the data showed.
Special payments, which include bonuses, rose 0.7 percent on-year in December, following a revised 7.8 percent annual increase in November. The data suggest that many companies paid year-end bonuses in November instead of December.
Overtime pay, a barometer of strength in corporate activity, rose an annual 0.9 percent in December, slower than a revised 1.9 percent annual increase in November.
In April-June last year Japan's output gap showed demand exceeded supply by the most in more than nine years, according to BOJ data.
Central bank officials and economists outside the BOJ took that as a positive sign that inflation would start to accelerate and pull the economy further away from returning to deflation.
However, data on wages and overtime pay shows that it may take more time for the benefits of an improving output gap to show up in other parts of the economy.
The ministry defines "workers" as 1) those who are employed for more than one month at a firm that employs more than five people, or 2) those who are employed on a daily basis or have less than a one-month contract but had worked more than 18 days during the two months before the survey was conducted at a firm that employs more than five people.
To view the full tables, see the labor ministry's website at: http://www.mhlw.go.jp/english/database/db-l/index.html