Japanese drew down savings for the first time on record while wages adjusted for inflation dropped the most in almost five years, highlighting challenges for Prime Minister Shinzo Abe as he tries to revive the world’s third-largest economy.
The savings rate in the year through March was minus 1.3 percent, the first negative reading in data back to 1955, the Cabinet Office said. Real earnings fell 4.3 percent in November from a year earlier, a 17th straight decline and the steepest tumble since December 2009, the labor ministry said today.
A higher sales tax combined with the central bank’s record easing are driving up living costs, squeezing household budgets and damping consumption. Abe’s task is to convince companies to agree to higher wages in next spring’s labor talks to sustain a recovery.
“Households are suffering from a decline in real income,” said Hiromichi Shirakawa, an economist at Credit Suisse Group AG who used to work at the Bank of Japan. . . .
The savings rate, which the Cabinet Office calculates by dividing savings by the sum of disposable income and pension payments, peaked at 23.1 percent in fiscal 1975.
As Japan’s population ages, its growing ranks of elderly are tapping their savings, according to the Cabinet Office. Consumers also ran down savings to make purchases ahead of a sales tax-increase in April, the first since 1997.
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