Should real wages turn positive in the second half of this year, it will be the first time since the early 1990s that the wage growth rate exceeds the inflation rate. Inflation can change consumer behavior, while a steady increase in income, accompanied by an aging population and work style reforms, has the potential to lead to an increase in spending on goods and services that enhance the quality of life.
However, there are factors inhibiting consumption, such as (1) modest real wage growth, (2) limited growth in disposable income due to social security burdens, and (3) persistent concerns about the future among the population. Therefore, reforms aimed at enhancing the future sustainability of wage and price cycles, as well as personal consumption, are needed to continue progressing.
Full article: pdf AMO Insight 'Personal Consumption Trend After Real Wages Turning Positive'
Written by Yuko Iizuka, Economist, Asset Management One Co. Ltd