In recent months, officials at the Bank of Japan have been scratching their heads at a puzzling phenomenon. In spite of nearly three years of robust economic growth, a run of dazzling corporate profits and recent signs of a tightening labour market, wages have been falling.

Even in the second quarter of 2004, when the economy was growing at an exhilarating 6 per cent a year, total remuneration was still falling by 1.1 per cent. This has been the seventh straight year of decline. If the US has experienced a largely jobless recovery, Japan is going through a wageless one.