Japan’s Real Wages Decline Amid Rising Prices

TOKYO (Reuters) – Japan’s inflation-adjusted real wages fell for the fourth consecutive month in November, affected by rising prices despite base pay increasing at the highest rate in over 30 years, according to government data released on Thursday.

The Bank of Japan is considering various risks regarding the timing of interest rate hikes. It has emphasized that sustained, broad-based wage increases are essential for increasing borrowing costs.

Inflation-adjusted real wages, an indicator of consumer purchasing power, dipped 0.3% in November compared to the previous year. This decline marks the fourth month in a row of decreasing wages. The labor ministry revised October’s previously reported flat reading to a 0.4% decrease.

The consumer inflation rate, which the government utilizes to calculate real wages and includes fresh food prices but excludes rent equivalents, increased by 3.4% year-over-year, up from a 2.6% rise in October, indicating heightened inflationary pressure.

Base salary, or regular pay, surged 2.7% in November, reflecting the fastest increase since 1992, after major companies consented to higher wages during the spring negotiations.

Overtime pay, seen as a gauge of business health, climbed 1.6% for the month, following a revised gain of 0.7% in October. Special payments, which consist mostly of volatile one-off bonuses, rose by 7.9% in November, rebounding from a revised fall of 2.2% in October.

Total cash earnings, or nominal pay, increased by 3.0% to 305,832 yen ($1,935.03) for the month, the data indicated.

According to the chair of a major business lobby, large Japanese companies are expected to raise wages by about 5% in 2025, the same rate as last year, with commitments to extend wage growth to smaller firms.

Prime Minister Shigeru Ishiba’s government has prioritized increasing pay as a public policy goal, pledging to advocate for wage hikes during this year’s spring negotiations.

During last year’s discussions, Japanese companies implemented their most significant pay increase in 33 years.

($1 = 158.0500 yen)