Japan’s real wages drop at fastest pace since 2014 as hot inflation takes toll

An employee of a supermarket named Akidai works at a meat corner inside a store in Tokyo, Japan January 20, 2023. REUTERS/Issei Kato


By Kantaro Komiya and Tetsushi Kajimoto

TOKYO (Reuters) – Japan’s real wages fell the most in nearly nine years in January, official data showed, as four-decade-high inflation squeezed the purchasing power of consumers and undercut efforts by policymakers to revive a COVID-ravaged economy.

Wage trends in the world’s third-largest economy are under close market scrutiny because Bank of Japan officials have said that pay hikes, combined with 2% inflation, are essential to it scaling back its loose monetary policy.

The central bank is set to maintain its ultra-low interest rates at a policy review on Friday, as it awaits a leadership transition that could eventually end outgoing head Haruhiko Kuroda’s radical stimulus.

Inflation-adjusted real wages, a barometer of households’ purchasing power, fell by 4.1% in January from a year earlier, the largest decrease since May 2014, labour ministry data showed on Tuesday. It followed a revised 0.6% drop in December.

“Real wages have probably hit the bottom in January as government subsidies on electricity and gas charges have taken effect in February and base effects of commodity price hikes have run their course,” said Azusa Kato, senior economist at BNP Paribas (OTC:BNPQY) Securities.

“Given that wage hikes are gathering momentum towards the annual labour negotiations this month, the Bank of Japan will come under pressure to tweak its yield curve control as early as this week. Even if it stands pat, it will stay under pressure.”

The fall in real wages comes as major Japanese firms including Toyota, Nintendo and Fast Retailing pay heed to policymakers’ calls and union demands by announcing plans for historic pay rises.

Japan’s economy averted recession in the fourth quarter but rebounded much less than expected, delaying a recovery from the scars of the COVID-19 pandemic.

Total cash earnings, or nominal wages, posted a 0.8% year-on-year gain in January, the data showed, much weaker than a revised 4.1% growth in December, when strong one-off winter bonuses drove up overall salaries.

The feeble nominal growth in wages in January was well short of the 5.1% consumer inflation rate used to calculate pay in real terms. The inflation rate excludes owners’ equivalent rent.

Currently, Japan’s core consumer inflation, which excludes volatile fresh food prices but includes oil products, is running at 4.2%, the fastest pace since 1981.

Overtime pay, a gauge of business activity strength, rose 1.1% year-on-year in January, its weakest growth in 22 months.

Special payments fell by 1.7% in January, after a revised 6.5% growth in the previous month. The indicator tends to be volatile on months other than the bi-annual bonus seasons of November to January and June to August.

The following table shows preliminary data for monthly incomes and number of workers in January:


Payments (amount) (yr/yr % change)

Total cash earnings 276,857 yen ($2,035) +0.8

-Monthly wage 265,800 yen +0.8

-Regular pay 247,153 yen +0.8

-Overtime pay 18,647 yen +1.1

-Special payments 11,057 yen -1.7


Number of workers (million) (yr/yr % change)

Overall 51.693 +1.6

-General employees 35.222 +0.9

-Part-time employees 16.471 +3.0


The ministry defines “workers” as 1) those employed for more than one month at a company that employed more than five people, or 2) those employed on a daily basis or had less than a one-month contract but had worked more than 18 days during the two months before the survey was conducted, at a company that employs more than five people.

To view the full tables, see the labour ministry’s website at:

($1 = 136.0100 yen)


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