Japan’s real wages fell at fastest pace in over 8 years in Nov

TOKYO – Japan’s real wages fell at their fastest rate – 3.8 percent – in more than eight years in November as a result of higher inflation, while nominal pay growth slowed despite rising for the 11th straight month, official data showed on Friday.

Sluggish wage recovery remains a pressing issue for Japan to tackle as surging living costs hurt households and weigh on consumer spending in the world’s third largest economy.

Japanese Prime Minister Fumio Kishida this week urged firms to accelerate wage hikes that exceed the rate of inflation to prevent stagflation.

Inflation-adjusted real wages, a key indicator of consumer purchasing power, dropped 3.8 percent in November from a year earlier, according to the labour ministry.

It was the fastest pace of decline since a 4.1-percent drop in May 2014 and followed a revised 2.9 percent  fall in October. Moreover, real wages were in negative territory for the eighth month in a row due to higher inflation.

The consumer price index the ministry uses to calculate real wages, which includes fresh foods but not owners’ equivalent rent, rose 4.5 percent in November from a year earlier, the quickest pace of increase since June 1981.

Nominal total cash earnings were up 0.5 percent in November but the pace of growth slowed from a revised 1.4% gain in October, led by falls in special payments such as bonuses.

Special payments declined 19.2 percent in November, the biggest drop since January 2021, after a revised 2.9 percent rise in October.

Industries such as transportation and wholesales showed double-digit falls in special payments, the data showed.

Japanese firms typically pay bonuses in the summer and winter, which tend to be volatile as they reflect changes in profits and the status of the economy.

Meanwhile, overtime pay, a gauge of business activity strength, advanced 5.2% year-on-year in November after a revised 7.7 percent gain in October.