Following on from my last post about the continuing Japanese consumption decline, I have put a somewhat larger post up on Afoe, trying to link this in with the latest figures for declining retail sales in Germany.
This piece from the FT which in general simply confirms the overall picture, does contain a useful perspective on how the dynamics of intergenerational transition may be also affecting the non pass-through of improved employment into spending:
Hiroshi Shiraishi, economist at Lehman Brothers, said he expected the divergence between strong corporate health and weak wages and consumption to persist.
Companies were taking a bigger share of profits worldwide, he said, but the trend was particularly stark in Japan where the component of more demanding foreign shareholders had increased sharply in the 1990s. “Corporations are increasingly more focused on the shareholder,” he said. “Especially at big companies, the workers’ share of corporate earnings is dropping very sharply.”
Second, said Mr Shiraishi, high-paid babyboomers born after the war were beginning to retire in large numbers and were being replaced by much lower-paid graduates. That trend would continue for several years, suppressing wages, he said.
Finally, the weak yen, though good for exporters, was squeezing profit margins of companies that needed to buy commodity inputs from abroad. “Small companies in particular are finding it difficult to pass on these costs by way of higher prices, so this is forcing them to restrain wages.”
Although the headline number for December edged up 0.1 per cent to 4.1 per cent, the more significant jobs to jobs-seekers ratio climbed to 1.08, the tightest labour conditions since 1992. That means there are now 108 jobs for every 100 people seeking work.
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