Japan Mar Average Wages +0.8% Y/Y, 1st Rise In 22 Months

The average monthly total cash earnings per regular employee in Japan rose by a preliminary 0.8% year-over-year to Y275,637 in March, posting the first y/y rise in 22 months, data from the Ministry of Health, Labor and Welfare released on Friday showed.

It followed a 0.6% fall in February, when the pace of the y/y drop accelerated from -0.2% in January, because the delayed year-end bonus payment included in the January data fell out of the calculation in February.

March’s rise in the average wage was the first since +0.2% in May 2008.

The latest data also showed other improvement in the wage situation: overtime pay rose for the third month in a row, pushing up overall compensation, although the “base wage” — the key indicator for a recovery — still showed a slight drop from the year-earlier level.

Another indicator of a gradual improvement in the labor market was the number of regular employees, which posted the second straight year-on-year rise in March after showing the first gain in 10 months in February.

Overtime pay in March surged 11.7% year-on-year after +8.1% in February, aided by a jump in overtime hours worked at factories (payback for the plunge in early 2009). January’s 2.4% gain in overtime pay was the first y/y gain in 18 months.

Overtime hours worked and overtime pay hit bottom in March last year, which means they will show year-on-year growth for the next several months.

In inflation adjusted terms, the average total wage rose a preliminary 2.1% y/y in March after rising 0.6% in February.

This was the third straight y/y gain, with real wages improving gradually from the record drop of 5.2% posted in June last year.

Overtime hours worked in the manufacturing sector posted the fourth straight year-on-year rise in March, surging by another record increase of 56.1%, surpassing the previous record growth of 54.6% hit in February 2010 and recovering steadily from the record drop of 48.9% in March 2009.

Moreover, overtime hours at factories rose 0.8% month-on-month on a seasonally adjusted basis, showing the 12th straight m/m gain.

Overtime hours have been recovering fast since October 2009, led by the automobile and electronics sectors. This has pushed up the level of overtime pay.

Total overtime hours worked for all industries rose by a fresh record of +13.3% y/y in March, topping the previous record gain of +11.4% marked in the previous month. January’s +4.4% was the first year-on-year rise in 18 months.

Total hours worked for all industries continued to improve in March, up by 3.2%, after rising 0.6% in February. The 0.4% rise in January was the first y/y gain in 18 months.

Three years of steady job creation until April 2009 were replaced by job losses or flat employment levels through the end of last year, but the latest data indicate a recovery in the labor market.

The number of regular workers rose by 0.2% in March after rising at the same pace in February. The gain in February was the first y/y gain in 10 months since +0.3% in April 2009.

Cash earnings include overtime and bonuses. Regular employees are workers on permanent payrolls as well as those with part-time status.

Average “base” salaries, or scheduled cash earnings, at surveyed companies that employ five or more people fell 0.2% y/y in March vs. -1.0% in February, posting the 20th straight y/y drop, but the pace of decline has decelerated gradually.

Bonus and other special cash earnings, which tend to fluctuate sharply, rose 11.2% y/y in March vs. -26.1% in February.