The Japanese government announced on Monday (July 7th) the latest data showing a 2.9% decrease in real wages in May compared to the same period last year, marking the largest decline since September 2023. This marks the fifth consecutive month of negative growth in real wages, indicating that wage growth continues to lag behind rising prices, eroding consumers’ purchasing power.
The “Monthly Labor Survey” preliminary report released by the Ministry of Health, Labor and Welfare in Japan indicated that the total cash earnings including basic salaries and overtime pay (nominal wages) averaged 301,410 yen per person, an increase of 1.0% from the same period last year, achieving 41 consecutive months of positive growth.
However, subtracting the comprehensive consumer price index (CPI) excluding hypothetical rent for owned houses, which rose by 4.0% year-on-year, resulted in a decrease in the real wage index to 82.8 points, down by 2.9% annually.
The decline in real wages means that even though nominal wages have increased, the actual purchasing power has weakened due to a greater increase in prices.
The Ministry of Health, Labor and Welfare noted that while basic wages continue to steadily increase, significant fluctuations in special payments such as bonuses, along with the continuous rise in prices of rice and other food items, have pushed up overall living costs, a primary factor contributing to the decline in real wages.
According to the statistics from the Ministry of Health, Labor and Welfare, for companies with 30 or more employees, the total cash earnings in May amounted to 335,164 yen, up by 0.3% annually, marking 51 consecutive months of positive growth. In comparison, the average salary for overall businesses with 5 or more employees was 301,410 yen, up by 1.0% annually, with a slightly higher growth rate compared to large enterprises. This indicates that salaries in small and medium-sized enterprises are lower but have shown relatively faster growth recently.
The overall basic wage for workers was 268,177 yen, up by 2.1% annually, continuing to rise for 43 consecutive months.
However, special payments (including bonuses and other one-time payments) significantly decreased to 12,595 yen, down by 18.7% annually, being the main factor dragging down the overall wage performance in May.
Additionally, the average cash earnings for regular workers in May were 384,696 yen, up by 1.1% annually, with basic wages increasing by 2.5%. The hourly wage for part-time workers was 1,382 yen, up by 4.0% annually.
According to Japanese labor union statistics, during this year’s spring wage negotiations (Shunto), Japanese companies agreed to increase wages by an average of 5.25%, marking the second consecutive year of achieving over 5% annual growth and reaching the highest level in 34 years. However, officials from the Ministry of Health, Labor and Welfare pointed out that this wage increase achievement has not been fully reflected in the wage statistics for May.
The Ministry of Health, Labor and Welfare also indicated that many of the surveyed companies are small in scale and do not have unions, leading to a relatively slower pace of actual salary increases compared to large enterprises.
Furthermore, since summer bonuses are typically concentrated in June, the portion of this expenditure from some companies has not been reflected in the May data.
Officials from the Ministry of Health, Labor and Welfare stated that the future rebound of real wages will depend on the payment of bonuses in June and the trend of prices, with authorities planning to closely monitor the situation.
Despite the continuous decline in real wages in May, household spending in Japan showed the fastest growth in nearly three years, offering a glimmer of hope for the consumer market.
Reuters pointed out that wage trends have become one of the core indicators for the Bank of Japan (BOJ) to judge whether to raise interest rates in the future. If real wages cannot turn positive, it may affect the recovery of consumption and price stability, further impacting the pace of normalizing monetary policy.
Additionally, it was reported that the looming uncertainty of the United States imposing tariffs on Japanese exports may squeeze business profits, further affecting the prospects of wage growth and adding variables to Japan’s economic recovery.