Why are Japan's real wages falling so fast?

Japan's real wages fell sharply in November due to a significant drop in bonus payments and inflation outpacing nominal wage growth.

What is the Bank of Japan's stance on wage growth?

The Bank of Japan expects firms to continue raising wages steadily and has signaled continued interest rate hikes this year.

How much did nominal wages increase in Japan?

Average nominal wages in Japan rose by 0.5% in November, the slowest pace since December 2021.

Home / Business and Economy / Japan Wages Plummet: Inflation Outpaces Pay

Japan Wages Plummet: Inflation Outpaces Pay

8 Jan

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Summary

Real wages in Japan fell 2.8% in November, the fastest drop since January.
Overall nominal wages rose slowest since December 2021, up only 0.5%.
Inflation remains high at 3.3%, challenging the Bank of Japan's policy.

Japan Wages Plummet: Inflation Outpaces Pay

Japan recorded its fastest decline in real wages since January during November, with inflation-adjusted earnings dropping by 2.8% compared to the previous year. This downturn was primarily influenced by a substantial 17% decrease in special one-off bonus payments, a figure often showing volatility outside typical bonus seasons.

Overall nominal wages saw their slowest growth rate since December 2021, increasing by a mere 0.5%. While regular pay showed some resilience with a 2.0% rise, and overtime pay gained 1.2%, these were insufficient to counter the impact of bonus payments and persistent inflation, which stood at 3.3%.

The ongoing trend of inflation outpacing wage growth presents a significant challenge for the Bank of Japan. Despite this, the central bank has signaled its intention to continue raising interest rates this year, anticipating steady wage increases through upcoming labor negotiations. Unions are targeting at least a 5% pay increase.