Japan’s real wages experiences biggest drop in almost a decade

Despite the government’s efforts to push for higher pay, real wages for employees has continued to fall because of inflation.
By: | March 9, 2023

Inflation is continuing to outpace wage gains in Japan, with real cash earnings for employees falling by 4.1% from January 2022, marking a 10th consecutive month of decline, reported Japan’s Labour Ministry.

Exacerbated by a slump in bonuses for part-timers negatively impacting overall pay, the drop in wages also represents the largest decrease since 2014, despite efforts by the central bank to push for robust wage gains to offset against inflation.

According to Haruhiko Kuroda, Governor of the Bank of Japan (BOJ), the central bank will continue monetary easing until wages and prices rise steadily. While nominal cash earnings rose 0.8% from January 2022, they are still far from the level that the central bank deems necessary for sustainable price growth. Kuroda suggested that a 3% wage hike would be necessary to support stable 2% inflation in Japan.

READ: Employees in Japan saw earnings soar in December 2022

Japanese Prime Minister Fumio Kishida has been urging business leaders to raise wages at a faster pace than inflation to boost people’s spending power and kick-start a virtuous cycle of business activity. The government’s economic stimulus package of 39 trillion yen (US$284 billion) in fiscal outlay included incentives for organisations to increase payrolls. The latest salary data by the Labour Ministry comes before the upcoming spring wage negotiations between organisations and labour unions, with the latter pushing for significant pay increases for employees, reported The Straits Times