Monetary and Economic Studies Vol.21, No.2 / August 2003

Are Japanese Nominal Wages Downwardly Rigid? (Part I): Examinations of Nominal Wage Change Distributions

Sachiko Kuroda, Isamu Yamamoto

This paper examines downward nominal wage rigidity in Japan at the individual level using Japanese longitudinal data. By observing the nominal wage change distributions and applying several statistical tests for asymmetry to them, we obtain the following findings. First, using 1993-98 data, the nominal wage change distributions are statistically skewed to the right with large spikes near the zero points, which indicates that downward nominal wage rigidity does exist in Japan. Second, the extent of the downward nominal wage rigidity is sensitive to the choice of nominal wage measures. While the extent of the downward rigidity for the hourly wages of part-time female employees is substantial, those for the regular monthly salaries and annual earnings of full-time male and female employees are limited in the sense that approximately one-fourth of the full-time employee samples experience nominal cuts. Third, for the regular monthly salaries of male employees only, the observed right-skewness of the nominal wage distributions tends to decrease as the inflation rate rises, although the analysis is limited to a period with an extremely low inflation rate.

Keywords: Downward nominal wage rigidity; Inflation rate; Monetary policy; Longitudinal data; Nominal wage change distributions

Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.

Copyright © 2003 Bank of Japan All Rights Reserved.

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