Japan labor cash earnings dropped -2.1% yoy in May, well below expectation of -1.1% yoy. That’s also the steepest decline since the -2.8% fall recorded back in June 2015. A labor ministry official was quoted by Reuters saying that “the impact from the coronavirus led to a reduction in overtime pay which caused real wages to fall a lot.”

Household spending dropped -16.2% yoy, also much worse than expectation of -12.2% yoy. That’s a record decline since comparable data first became available in January 2001. It also followed a prior record of -11.1% yoy decline reported a month ago in April.

Despite the poor data, BoJ could likely keep at economic assessment unchanged in the post statement meeting next week. It’s believed that the economy had already hit the bottom in Q2, like many other countries in the world. The question now is on the pace and sustainability of recovery.

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