Japan’s Real Wages Drop in January, Spring Wage Talks in Focus

Reuters

11:48 JST, March 10, 2025

TOKYO, March 10 (Reuters) – Japan’s real wages fell in January after two months of slight gains, data showed on Monday, days before the annual rounds of pay negotiations held each spring culminate at the country’s major firms.

Despite regular pay rising the most in more than 30 years and overtime pay increasing, lifting nominal wages, inflation at a two-year high dragged down real wages – the indicator policymakers see as key to achieving consumption-driven economic growth.

The Bank of Japan is widely expected to keep interest rates unchanged at its next policy review on March 18-19, as officials repeatedly cite the need to gauge the sustainability of wage growth after the central bank’s January rate hike.

Inflation-adjusted real wages, which determine consumers’ purchasing power, dropped 1.8% in January from a year earlier, labor ministry data showed. The decline followed a revised 0.3% rise in December and 0.5% gain in November.

The consumer inflation rate the ministry uses to calculate real wages, which includes fresh food items but not rent costs, rose to 4.7% year-on-year – the highest reading since January 2023.

Regular pay, or base salary, rose 3.1% in January following December’s revised 2.6% increase and marking the biggest jump since 1992, the data showed.

Overtime pay, a barometer of corporate activity strength, also jumped 3.1%, after a revised 0.8% gain in December.

Special payments, mainly made up of volatile one-off bonuses, were down 3.7%. Total cash earnings, or nominal pay, rose 2.8% to 295,505 yen ($2,004) on average, slowing from December’s revised 4.4% rise, due largely to the drop in special payments.

Japan’s largest labor group last week said its member unions were demanding an average 6.09% pay hike, their boldest claim in more than 30 years.

In Japan, annual wage talks between management and labor unions conclude around mid-March among major firms, setting a standard for the salary negotiations of non-unionized workers and smaller enterprises.

The effect of these annual spring talks typically begins to show up in wage statistics for April or later, according to a labor ministry official.