### Section 2. Trends of commodity prices and wages

Commodity prices have risen in the energy sector as the yen’s exchange rate weakened from the autumn of 2012, and the demand/supply balance at the macro level improved in conjunction with economic recovery. This has stopped the deflationary trend and commodity prices showed a gradual sign of improvement in 2014, moving forward steadily to overcome deflation.

Wages in 2013 improved. The total sum of cash earnings, which has been decreasing for the second consecutive year, has rallied and the annual summer bonus increased for the first time in three years, as well as year-end bonus for the first time in five years. Besides, the ratio of active job openings to active job applicants exceeded 1 and the excessive employment trend has turned to an insufficient trend. Labour supply and demand has become more balanced and it is considered that we will soon be able to develop an environment that can provide wage increases. It is important to improve labour productivity in order to increase real wages. In order to further increase wages, it is necessary to put investment on IT capital and improve labour quality by accumulating human capital through human resources development.

## (Commodity prices have gradually increased in energy sector)

Thanks to the weakening of the yen’s exchange rate, the domestic corporate goods price index in 2013 increased by 1.3% from the previous year for the first time in two years. The corporate services price index also increased by 0.4% from the previous year, for the first time in five years since 2008.

Figure 8 shows the trend of consumer prices in 2013. The general index and general index excluding fresh foods (so-called "core") started to pick up due to the weakened yen's exchange rate and both indexes increased by 0.4% compared to the previous year. This was the first increase in five years since 2008, when oil prices rose at a considerable level. The general index excluding fresh foods, petroleum products and other special factors (so-called "core-core") is increasing on a month-by-month basis from 2013 and the improvement in supply/demand balance at a macro level is considered to be contributing to the commodity price increase.

In response to these trends, the "Monthly Economic Report" published by the Cabinet Office said that commodity prices are "showing a gradual increase" in February 2014. This shows a steady progress toward overcoming deflation.

## (The total sum of cash earnings is in a rising trend)

Now, we shall look at the trends in the total sum of cash earnings in Table 9. The total sum of cash earnings had been declining for the second consecutive year after 2011 but started to pick up in 2013. Specifically, a rise in the ratio of part-time workers put declining pressure on it and scheduled wages decreased. However, non-scheduled wages increased as a result of larger product activities, which also contributed to the rise in special wages.

Looking at the total sum of cash earnings by general/part-time employment, the average total sum of cash earnings for general workers in 2013 increased by 0.7% compared to the previous year. Although the total sum of cash earnings for part-time workers decreased by 0.6% compared to the previous year, this may be because the number of workers with shorter working hours increased. General wages of part-time workers are in a rising trend.

## (Summer and year-end bonuses both increased from the previous year in 2013)

Figure 10 shows the transitions of summer and year-end bonuses. In 2013, summer bonus and year-end bonus increased for the first time in three years and five years, respectively. More specifically, annual summer bonuses increased to 359,317 yen, up 0.3% from the previous year, and year-end bonus increased to 366,865 yen, up by 0.3% from the previous year.

The smaller the scale of business is, the lower the amount of bonus is. Therefore, it should be noted that, if the ratio of workers who are given a bonus by small-scale businesses to the total workers who receive a bonus is high, the average bonus allowance will decrease. Actually, although the annual summer bonus in