Japan's Wages Surge Most Since '97 as BOJ Tightens Monetary Policy

Japanese workers' nominal wages rose at their fastest pace in nearly three decades in July, according to data released by the labour ministry. The 4.7% increase from a year earlier far exceeded economists' forecast of 3.8% and marked the sixth consecutive month with an advance above 3%, the longest streak in 34 years.

The strong wage growth is attributed to healthy corporate profits, which have enabled companies to shoulder higher labour costs. Nominal pay climbed 4.7%, while real wages, adjusted for inflation excluding rents, gained 2.4%. Base pay advanced 4.1%, and a more stable measure rose 2.7% for full-time workers.

The BOJ's ability to sustain its tightening path will depend on whether rising incomes translate into stronger domestic demand. Household spending fell for an eighth consecutive month in July, as shoppers cut back on discretionary outlays. However, wage gains are partly due to another strong round of annual wage negotiations, through which workers secured pay gains of more than 5% for a third year.