Japan's real wages fall 1.8% in January, first drop in 3 months

Japan's real wages fell 1.8 percent in January from a year earlier, the first drop in three months, due to higher food and gasoline prices, government data showed Monday.

Nominal wages, or the average total monthly cash earnings per worker including base and overtime pay, increased 2.8 percent to 295,505 yen at workplaces with five or more employees, rising for the 37th straight month, according to the Ministry of Health, Labor and Welfare.

But the rise in nominal wages was outpaced by a 4.7 percent increase in consumer prices used for the salary data, according to the labor ministry.

Reduced government subsidies to curb gas prices, and high prices of rice and fresh vegetables contributed to increased inflation.

A ministry official said real wage growth is expected to remain in negative territory "unless price rises cool," noting that the results of the country's spring wage negotiations between management and labor unions will only be reflected in the statistics from April.

Real wages, or inflation-adjusted wages, a barometer of consumer purchasing power, dropped for 26th straight months through May 2024. Later in 2024, it increased year-on-year only when bonuses were paid in June, July, November and December.

At workplaces with 30 or more employees, real wages dropped 0.7 percent in January from a year earlier, down for the first time in five months, the provisional data showed.

Wage growth is being closely watched by the government as it continues to call on businesses to increase pay at a faster pace than prices.

The Bank of Japan also sees sustainable wage growth as a prerequisite to lifting its key policy rate for monetary policy normalization.

Japan's spring wage negotiations began in January, with the leaders of the top business lobby and biggest labor federation agreeing on the importance of maintaining momentum for pay hikes amid soaring prices.

The outcomes at most major Japanese companies are expected to be reported on Wednesday.

On Monday, meanwhile, an alliance of labor unions in the electrical industry said it decided to set the minimum base salary increase it will accept in the spring wage negotiations at more than 10,000 yen per month.

The level sought by the Japanese Electrical Electronic & Information Union is the same as last year's, which was the highest since comparable data became available in 1998.