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Economy

Faulty data scandal reveals lower 2018 wage growth in Japan

Labor ministry revisions cast further doubt on Abe government's 2% inflation target

Wednesday's revisions show households have less disposable income than previously thought.

TOKYO -- A data scandal at Japan's labor ministry has created further headaches for the Abe government in its protracted attempts to spur inflation.

The ministry's Monthly Labor Survey overstated nominal pay increases in the first eleven months of 2018. Corrected monthly results released on Wednesday saw year-on-year wage growth drop by between 0.1 and 0.7 percentage point. Officials revised data for every month.

The Bank of Japan has been trying since 2013 to reach 2% price growth and bring the country out of deflation. Wage hikes, policymakers have argued, increase consumers' purchasing power and push prices up. But Wednesday's revisions show households have less disposable income than previously thought.

The scandal stems from the ministry's failure to survey all companies in Tokyo with 500 or more employees. Since 2004 it has collected data from only about one-third of such businesses. Pay at large companies is relatively high, meaning the total wages paid were greater than the published results.

Officials corrected the survey methodology last year, meaning that wages appeared to jump significantly from a year earlier. With the revisions applied to previous years, however, 2018's pay hikes are shown to be less dramatic.

Before the data was corrected, wages in June 2018 were seen as having grown by 3.3% on the year, the biggest jump in over two decades. That figure was revised down to 2.8%.

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