(Reuters) - Japan's inflation-adjusted real wages fell in April from a year earlier but slowed the pace of decline as the Bank of Japan looks for early signs of achieving a positive cycle of rising wages and inflation that would allow it to lift interest rates.
Labour ministry data out on Wednesday showed real wages fell 0.7% year-on-year in April, extending a record streak of 25 consecutive monthly declines as higher living costs outweighed pay raises. But it was a slower pace of decline than the preceding month's 2.1% drop.
The previous record was a 23-month run of declines in real wages from 2007 to 2009 during the global financial crisis, which had led to millions of job losses.
This time, stubborn inflation was to blame for sliding real wages, with consumer inflation of 2.9% outpacing nominal wages.
The central bank closely scrutinises the strength of wage growth, which is a prerequisite for policy normalisation, having raised rates in March for the first time since 2007 in a landmark shift away from years of easing policy. It is expected to stand pat on policy in its June 13-14 rate review.
On the brighter side, the labour ministry data showed scheduled cash earnings, or regular pay, rose 2.3% year-on-year in April, matching the previous high seen in October 1994, shortly after the country's asset bubble burst.
"The data confirmed steady wage hikes, with the big gain in base pay reflecting the results of recent labour talks," said Koya Miyamae, senior economist at SMBC Nikko Securities.
This year, major Japanese firms have offered more than a 5% increase in workers' monthly pay, a level unseen in about three decades. The gains in base pay are now expected to spread to employees of smaller firms, a labour ministry official said.
Workers' earnings, however, are still lagging behind rising costs, underscoring the challenges policymakers face in getting companies to bring real wages into positive territory.
Some economists expect real wages to turn positive at some point in the current 2024/25 fiscal year, but uncertainty over the estimate remains high.
Nominal wages, or the average total cash earnings per worker, grew 2.1% to 296,884 yen ($1,913.28), accelerating from the previous month's 1.0% and rising at the fastest pace in 10 months.
Overtime pay, a barometer of corporate strength, slipped 0.6% in the year to April, the labour ministry data showed.
($1 = 155.1700 yen)