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TOKYO, Feb 3 (Reuters) - Japanese overtime pay in December marked the biggest annual fall in nearly 16 years, government data showed on Tuesday, highlighting deteriorating wage conditions as the world's No. 2 economy slips deeper into recession.
Prime Minister Taro Aso reiterated that Japan was not immune to the global economic downturn, which he said was unprecedented in the sense that recession was spreading simultaneously around the world and accompanied by signs of deflation.
"Japan's economy is worsening rapidly, led by exports," Aso told a lower house budget committee. "The degree of downturn is extremely severe compared with the past."
In a sign households are feeling the pain as the financial crisis hits companies, overtime pay, a barometer of strength in corporate activity, fell 11.2 percent from a year earlier in December to mark the largest drop since April 1993, the wage data released by the labour ministry showed.
The fifth straight month of decreases came as companies halted factory lines to deal with an unprecedented pace of decline in worldwide demand.
"Manufacturers are halting operations at some of their plants, so it's inevitable that overtime pay falls," said Azusa Kato, an economist at BNP Paribas.
The global turmoil has already pushed much of the world's economy into recession, prompting policymakers to dish out trillions of dollars in bailouts and fiscal stimulus packages and drive borrowing costs ever closer to zero.
Japan's economy probably shrank 3.1 percent in the last three months of 2008, which would be the worst performance since 1974, as shock waves from the global financial crisis ripped through the export-driven economy, a Reuters poll showed.
The lower house of parliament is debating Aso's 88.5 trillion yen ($989.8 billion) budget for the fiscal year starting in April, the nation's biggest ever.
That budget, along with two other extra budgets for the current year, will finance 12 trillion yen in fiscal stimulus programmes, which amounts to more than 2 percent of Japan's gross domestic product.
The global economic slump since late last year has virtually frozen Japanese exports and production of cars and electronics, and the economy is seen headed for its longest recession in modern times.
Japanese companies, traditionally reluctant to cut staff, have been shedding jobs, so far mostly in lower-paid, nonregular positions, pushing up the jobless rate to a three-year high in December.
Wage earners' total cash earnings, which include regular pay, overtime pay and special payments, fell 1.4 percent in December from a year earlier, marking the second straight month of declines, according to the labour ministry data.
Growing worries about job security are weighing on personal consumption, which makes up roughly half of GDP, even though Japan has not had the sort of excesses with the housing market and mortgages that the United States and many European countries are grappling with.
The Japanese economy contracted in the second and third quarters, initially hit by a spike in oil and commodity prices, and the government has said the economy has been in recession since late 2007.