07-07-2025
Real wages fall for fifth straight month in May
Salary growth lagged inflation for a fifth straight month in May, with real wages falling the most in almost two years, according to government data released on Monday.
Inflation-adjusted pay declined 2.9% year on year in May, with the inflation figure used for the calculation that month set at 4%. It was the biggest drop since September 2023.
Overall nominal wages, including those for part-time workers, rose for a 41st straight month in May to an average of ¥300,141 ($2,069). But the pace of the growth has slowed in recent months.
It was 2.3% in March, 2% in April and 1% in May.
A major factor in the slowing of growth in May was an 18.7% drop in special pay, which includes bonuses.
Base salaries, which show the underlying wage trend, rose 2.1% to ¥268,177 — the 43rd straight month of increases.
Even though this year's spring wage negotiations ― known as shuntō ― achieved an agreement to increase wages more than 5%, a 34-year high, Japanese households are still being squeezed.
Takahide Kiuchi, executive economist at Nomura Research Institute, wrote in a report Monday that there is still a large gap between the inflation rate and the growth of base salaries.
'It's becoming uncertain that the real wage growth will turn positive by the end of the year,' Kiuchi wrote.
Rising food prices have squeezed Japanese households, leading to political parties coming up with measures to counter inflation to woo voters ahead of an Upper House election later this month. |
Nico Phillips
Japan's inflation is running at about 3% this year, far above the Bank of Japan's 2% target. Consumer inflation was 3.5% in May, with the price of rice more than doubling year on year.
High inflation, especially the rising price of food, is a primary focus in the July 20 Upper House election. Political parties are eager to woo voters with inflation countermeasures, such as cutting consumption tax rates and distributing cash handouts.
According to a poll by NHK last month, "rising prices" was the second most important issue for voters, following "social security and declining birth rate."
The administration of Prime Minister Shigeru Ishiba has been desperately trying to bring down rice prices before the election. Farm minister Shinjiro Koizumi has been working on the issue and managed to achieve some success over the past few weeks.
In addition to persistent inflation, U.S. tariffs are posing a risk to wage growth.
The tariffs will likely lead to a slowing U.S. economy and pessimism at Japanese corporations, which will affect next year's spring wage negotiations, said Daiju Aoki, regional chief investment officer at UBS SuMi Trust Wealth Management in Tokyo.
Japan and the United States are struggling to find common ground in their trade negotiations despite months of dialogue. Japan's priority is to eliminate a new 25% tariff on vehicles.
Given that wage growth in the auto industry, a major driver of the Japanese economy, sets the tone for other industries, pay increases next year might decelerate if the tariffs significantly weaken Japanese automakers.
