Japan Real Wages Drop for Historic 26th Straight Month Amid Inflation
Japan's inflation-adjusted real wages fell in May for the 26th consecutive month, marking a record streak, according to government data. This decline, a 1.4% drop from the previous year, is attributed to a weakening yen and higher commodity prices increasing import costs. Despite these challenges, base pay rose 2.5% year-on-year in May, the highest increase since January 1993, driven by significant wage hikes agreed upon in annual labor negotiations. Nominal wages also saw a 1.9% increase to 297,151 yen ($1,850), the highest pace in 11 months.
Wage hikes at firms with 30 or more employees outpaced inflation for the first time in 26 months, signaling some positive developments in the labor market. However, unexpected declines in household spending and a downgrade in first-quarter economic output figures have complicated the Bank of Japan's efforts to normalize monetary policy. While the data bolster the case for a potential near-term interest rate hike, the economic landscape remains uncertain.
