Tame Japan wages pose challenge to BOJ's inflation goal

TOKYO (Reuters) - Japanese wage earners' total cash earnings were almost flat in March and inflation-adjusted real wages marked a two-year stretch of declines, government data showed, ramping up the challenge for the Bank of Japan's aim of shaking off 15 years of deflation. The data could dash the central bank's hope that higher pay will spur consumer spending and nudge inflation towards its 2 percent target, which many analysts believe is overly ambitious. Wages have been slow to pick up in Japan as companies, small firms in particular, resist government pressure to substantially raise pay as they struggle to pass on costs, while a growing number of low-paid part-timers weigh on overall salaries. The labour ministry data showed wage earners' total cash earnings rose 0.1 percent year-on-year in March to 274,924 yen (1,499.83 pounds), up for the fourth straight month. Inflation-adjusted real wages fell 2.6 percent, down for the 23rd month in a row, as the effects of the sales tax hike offset the modest growth in pay and hurt consumers' purchasing power. Overtime pay, a barometer of strength in corporate activity, fell 2.3 percent in the year to March, down for the first time in two years and posting the biggest drop since February 2013. That weighed on overall wages in March. The decline was caused by an easing of increased overtime work a year ago among manufacturers, retailers and wholesalers, who were rushing to cope with demand ahead of the sales tax hike in April last year, a ministry official said. "Apart from such one-off factor, regular pay rose and we maintain our view that wages are recovering gradually," he said. Regular pay, or base salaries, which determine the trend of broader wages, rose 0.3 percent in the year to March, after a flat reading in the prior month, providing more evidence that companies are hesitant to boost personnel costs. On Thursday the BOJ pushed back the timeframe for achieving its ambitious price goal but held off from expanding its already massive stimulus programme. (Reporting by Tetsushi Kajimoto; Editing by Shri Navaratnam)