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Japan real wages drop in December, boding ill for consumer spending

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Japanese wages, on an annual inflation-adjusted basis, dropped in December for the first time in a year, government data showed on Monday, a setback for hopes that consumer spending can increase and help lift economic growth.

The decline was caused by a rise in the cost of living, which outpaced nominal pay hikes, officials said. Higher prices for items such as fresh vegetables have increased living costs.

The labor ministry data showed inflation-adjusted real wages dropped 0.4 percent in December from a year earlier, following a revised flat reading in November.

In nominal terms, wage earners' cash earnings rose 0.1 percent year-on-year in December, following a 0.5 percent gain in November. Special payments - most of which consist of winter bonus - fell 0.1 percent.

The data came as labor unionists and business leaders kick off the annual spring wage negotiations. These are expected to produce smaller wage gains than last year due to increased uncertainty on the global outlook.

Prime Minister Shinzo Abe has called on business leaders to support a sustainable economic recovery by raising employee wages, but it remains a struggle to accelerate pay hikes despite the tight job market and high corporate profits.

Nearly two-thirds of Japanese firms are considering no wage hikes this year, a Reuters poll showed last month.

For the whole of 2016, inflation-adjusted real wages rose 0.7 percent, up for the first time in five years, thanks in part to declines in consumer prices, the labour ministry data showed.

Regular pay, which accounts for the bulk of total pay and determines base salaries, increased an annual 0.5 percent in December from a year earlier, rising for a sixth straight month.

Overtime pay, a barometer of strength in corporate activity, fell 1.9 percent in the year to December, down for a seventh consecutive month.

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