Japan’s real wages fell for a fifth straight month in May, with inflation-adjusted pay declining 2.9% year on year. The drop was the largest since September 2023, according to government data. Nomura Research Institute’s Takahide Kiuchi warned that the real wage growth may not turn positive by the end of the year due to a large gap between the inflation rate and base salary growth.
Despite an agreement to increase wages over 5% in this year’s spring wage negotiations, households are still facing pressure due to high inflation. The Bank of Japan’s target inflation rate is 2%, but consumer inflation has reached 3.5% this year, with rice prices more than doubling year on year. This has become a major focus in the upcoming Upper House election.
The administration of Prime Minister Shigeru Ishiba aims to reduce rice prices before the election, while U.S. tariffs pose a risk to wage growth. The tariffs are likely to slow down the U.S. economy and affect Japanese corporations’ confidence, which could impact next year’s spring wage negotiations.
Japan and the United States are struggling to find common ground in their trade negotiations, with Japan’s priority being the elimination of a new 25% tariff on vehicles. If wage growth in the auto industry slows due to tariffs, it may set a negative tone for other industries and affect pay increases next year.
Source: https://www.japantimes.co.jp/business/2025/07/07/economy/wage-stats-july