Reply #51: Japan's Wages Unexpectedly Drop Most in 16 Months (Update3)

[54anickel]

http://www.bloomberg.com/apps/news?pid=20601080&sid=aTdfpzMVRyFM&refer=asia

Jan. 31 (Bloomberg) -- Japan's wages fell at the fastest pace in 16 months in December as companies paid lower winter bonuses, signaling consumer spending may remain too sluggish for the central bank to raise interest rates.

Monthly wages, including overtime and bonuses, unexpectedly fell 0.6 percent from a year earlier, the labor ministry said today in Tokyo. Workers brought home an extra 5,500 yen ($45) in total pay in 2006, about enough to buy a case of beer.

Bank of Japan Governor Toshihiko Fukui and his policy board this month held the key interest rate at 0.25 percent, with most members saying they need to further examine prices and consumer spending. Falling wages may prevent the world's second-largest economy from shaking off more than seven years of deflation.

``Nothing determines the future of prices and consumption more than wages,'' said Takuji Aida, chief economist at Barclays Capital in Tokyo. ``Poor wage data is a negative factor for a February rate hike.''

The median estimate of six economists surveyed by Bloomberg News was for wages to climb 0.5 percent. None predicted a drop.

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Unemployment hovering near an eight-year low and the biggest labor shortage in 14 years have yet to reverse a decade-long slide in wages that, according to Aida, stifled consumer spending and plunged the economy into deflation.

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