Japan June real wages down for 15th month despite solid nominal growth

TOKYO  – Japanese real wages fell for a 15th straight month in June on relentless price hikes, but nominal pay growth remained robust amid rising salaries for high-income workers and a broadening labor crunch.

Japan’s wage trends receive an unusual amount of attention from global financial markets as the Bank of Japan emphasizes sustainable pay hikes amid four-decade-high inflation as a prerequisite for dismantling its massive monetary stimulus.

Inflation-adjusted real wages, a barometer of consumers’ purchasing power, fell 1.6 percent from a year earlier, a faster decrease than May’s 0.9 percent drop, extending a streak of contractions since April 2022.

That was because a 2.3- percent increase in total cash earnings, or nominal wages, was far outpaced by 3.9 percent consumer price inflation under a measure the ministry uses that excludes owners’ equivalent rent.

Nominal pay growth in June was lower than a revised 2.9 percent rise in May, the fastest growth in nearly three decades thanks to solid jump in base salaries.

June’s base annual salary increase was 1.4 percent, also smaller than May’s 1.7 percent, but still higher than recent trend. Japan’s average base salary growth rate in 2022 was 1.1 percent.

Workers at major Japanese companies saw an almost 4 percent wage hike this year, according to a survey by elite business lobby Keidanren, while the country’s National Personnel Authority on Monday advised the central government to hike its workers’ base pay 10 times more than the average in the previous five years.

There are signs of broadening wage hikes. A government panel last month approved the biggest-ever increase in the national minimum wage. A July survey by research firm Teikoku Databank showed on Monday that 51.4 percent of companies across Japan were experiencing a shortage of regular workers, near the historical high of 53.9 percent seen in November 2018.

Overtime pay, a gauge of business activity strength, rose 2.3 percent in June, the fastest in six months, health ministry data showed.

Special payments rose 3.5 percent in June, after revised 35.9 percent gain in the previous month, although the indicator tends to be volatile in months outside the twice-a-year bonus seasons of November to January and June to August.