3 Funds To Gain From Strength In Japan’s Wage Growth

Japan’s labor ministry stated on Aug 6 that inflation-adjusted real wages in the country increased 2.8% to its highest level since January 1997. Such a rise can be attributed to steady increase in regular monthly pay as well as summer bonuses.

Historically, such events boost consumer spending and thus the GDP. Finally, expectations that Japan’s inflation would finally touch the elusive 2% target were high. Under such circumstances, investing mutual funds from Japan sun seems prudent.

Wage Growth Hits 21-Year High

Japan’s labor ministry also stated on Aug 6 that June’s real wages increased 1.3% from May. This was also the biggest increase since 6.2% growth that the metric achieved in January 1997. Moreover, the data comes right ahead of the release of Japan’s second-quarter GDP and might provide the required stimulus to the country’s inflation.

Analysts expect Japan’s second-quarter GDP to hit 1.4% growth. Finally, rising wages are also expected to fuel consumer spending as households in the country are likely to spend their summer bonuses on purchasing luxury items.

What Led to the Growth?

The biggest stimulus to a rise in real wages came from special one-off payments in the form of summer bonuses, which surged 7% on a year-over-year basis. Further, nominal cash earnings increased 3.6% year over year in June, surpassing its 2.1% rate of growth in May.

Another major factor supporting the growth in real wages was the country’s tightening labor market. Under tight labor market conditions, employers respond by increasing wages in order to restrict attrition levels. Notably, the number of job seekers in Japan increased in June to its highest level in the last 44 years. The country’s job-to-application ratio increased to 1.62 in June from 1.60 in May.

3 Best Funds to Buy Now

Given such circumstances, we have highlighted three Japan mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and one-year returns. Additionally, the minimum initial investment is within $5000.