The contraction in Japan’s economy in Q3 should prove short-lived. But the income data released alongside the GDP figures provide a more lasting reason for concern. The Bank of Japan had been able to point to signs of accelerating wage growth as evidence that inflationary momentum was building. But workers’ compensation – a broad measure of aggregate wages – slowed last quarter. With Q2’s growth rate also being revised down, the trend now looks much less encouraging. The monthly regular earnings data also show a slowdown: wage growth on this measure is back below 1% y/y, far short of what the Bank would need to generate 2% inflation.
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