Japan’s real wages fell -2.9% yoy in May, a sharp acceleration from April’s -2.0% drop yoy and the steepest decline since September 2023. This also marks the fifth consecutive monthly fall in inflation-adjusted income, as households remain squeezed by rising prices and underwhelming nominal pay growth. Consumer inflation, used to deflate nominal wages, stood at 4.0% yoy, driven by higher food costs, particularly rice.
Nominal wages rose just 1.0% yoy, well short of the 2.4% yoy forecast and down from 2.0% yoy in April. While base salary growth held at 2.0% yoy and overtime pay rose 1.0% yoy, a sharp -18.7% yoy plunge in special payments—largely one-off bonuses—dragged down the overall figure. May marked the 41st consecutive monthly rise in nominal wages, but the pace failed again to keep up with price growth.
Government officials cautioned that the wage data may not yet reflect the full impact of spring labor negotiations, especially as many small firms surveyed lack unions and implement pay increases more slowly than large corporations. Nonetheless, the prolonged real wage squeeze could weigh on consumer spending and affect BoJ’s plans to gradually normalize policy.