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Feeble wage growth raises odds of BOJ stimulus

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Another day, another indicator pointing to Japan's economic recovery starting to sputter.

Data released from the Ministry of Health, Labour and Welfare on Monday showed that real wages — compensation adjusted for inflation — rose in August just 0.2 percent from a year earlier, down from a 0.5 percent increase in July. Total cash earnings were up 0.5 percent, slowing from a 0.9 percent increase in July

The numbers make for grim reading, especially considering how feeble inflation is in Japan. Since June of last year, real wages have fallen in all but three months, indicating consumers' disposable income are continuing to be pinched.

Most recent data releases also point to a weakening economy, bolstering the case for more monetary easing, possibly as early as this week when the Bank of Japan's (BOJ) rate-setters meet.

"With China risks still looming large and the consequent demand deficit threatening to pressure Japanese exporters further the bar for more easing is lower," Mizuho economists led by Vishnu Varathan said in a note on Monday.

Industrial production sank in August and a closely watched survey showed confidence at large Japanese firms declined for the first time in a year in the three months to September, releases last week showed.

Japan's main inflation gauge – the core consumer price index (CPI) – dipped 0.1 percent on year in August, slipping further away from the BOJ's 2 percent inflation target.

It was the first year-on-year decline since April 2013, when the BOJ launched its unprecedented asset-buying program.

Japanese Prime Minister Shinzo Abe last month trained his guns back on the economy with an ambitious gross domestic product (GDP) target of roughly 20 percent growth over an undisclosed number of years, as well as three fresh "arrows" in what is being dubbed by some as "Abenomics 2.0"

Abenomics is the term widely used to describe Abe's approach to reflate the economy, which was originally based on three pillars: monetary easing, fiscal expansion and structural reforms.