Economic Short Comment （13 Nov 2023）
The pace of decline in real wages is comparable to that after the consumption tax hike～ The utmost caution is required for the outlook of consumption ～～4● Decline in real wages
Real wages continue to decline (Figure 1). Although nominal wages【Figure 1】

are increasing, they quickly turn negative when subtracted from the（％）
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rise in prices. In other words, the current situation is one where the4pace of price increases exceeds the pace of wage increases. The trend

2of real wages greatly affects consumers’perception of their income. The

0rate of decline in the early part of this year was over 4% at one point, a-2

level that has not been experienced in recent years. If real wages-4

decline this much, the negative impact on consumption is inevitable.
Looking back, the current pace of decline in real wages is comparable
to that of the consumption tax hike in 2014 (from 5% to 8%) (Figure 2).

Trends in real wages（per employee）
allarea
全国
osaka
大阪

-64 6 8 1012 2 4 6 8 1012 2 4 6 8 1012 2 4 6 820212223（Source）Ministry of Health,Labour and Welfare「MonthlyLabour Surbey」

At that time, the impact of the tax hike lasted for several years, causing
serious damage to the economy.

【Figure 2】（％）

Trends in real wages（all area）

3● Assessment of current consumption
On the other hand, there are not a few optimistic views on the2

1evaluation of current consumption. Positive factors such as the effect

0of wage increases this spring, the normalization of the economy due to-1

the end of the corona crisis, and the continuation of the stock market-2

rally are leading to optimistic evaluations in some quarters. In-3addition, the fact that sales by industry include purchases by inbound-4

visitors also supports the bullish view. However, it is not easy to-5reconcile the decline in real wages and the robust consumption. As
households become more conscious of saving, price-cutting pressure
increases at stores, which can also trigger deflation. Considering theslump in consumption in 2014, caution is essential for the negative
impact this time as well. Looking back at 2014, consumption did not
return to its previous level even after more than five years from the tax
hike, and it was in the form of welcoming the rush demand associatedwith the next 8% to 10% tax hike (Figure 3).

Cons umption
tax increase（5 → 8％）
LehmanShock

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23（Source）Ministry of Health,Labour and Welfare「MonthlyLabour Surbey」【Figure 3】
Trends in real consumption（2020 ＝100） （all area、seasonally adjusted）
125
120

115

Cons umption
ta x i ncrease（5 → 8％）

Cons umption
ta x i ncrease（8 → 10％）110● Caution for the outlook of consumption

105

Given that the current income environment is close to that of theconsumption tax hike, the utmost caution is required for the outlook ofconsumption. Already among consumers, there is a growing tendency

100
1314
1516
171819（Source）MIC「Family Income and Expenditure Surbey」※ The purpose of this document is to provide information and is not intended to solicit product transactions. Additionally, thisdocument has been created based on data deemed reliable by our company, but it does not guarantee accuracy or completeness. Thecontents mentioned in this document are as of the time of writing and may be subject to change without notice in the future.

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to save on necessities such as food, and demand for low-priced products is increasing. As a result, it is becoming
increasingly difficult to raise prices at stores. Not only that, but there are also signs of price cuts in some areas suchas eating out. In the future, sales in industries such as department stores and hotels are expected to remain strong
due to the increase in inbound visitors, but as for domestic consumption, it is hard to expect a steady trend as real
wages decline. After the consumption tax hike in 2014, several economic measures were implemented to stimulate
consumption. Following that, it should be considered that similar measures are necessary this time as well. Even
looking at the recently announced economic measures, the income tax cut, which is the prime minister’s pet project,
is in June next year, and it does not directly lead to stimulating consumption at the moment. Measures withimmediate effects are required.
（Reference）
Resona Research Institute Co.,Ltd
Hideyuki Araki, Chief Economist
hd-araki@rri.co.jp※ The purpose of this document is to provide information and is not intended to solicit product transactions. Additionally, thisdocument has been created based on data deemed reliable by our company, but it does not guarantee accuracy or completeness. The
contents mentioned in this document are as of the time of writing and may be subject to change without notice in the future.

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