Japan Real Wages: Updated Jan. 29, 2025.

Japan's real wages in Nov. revised up, log 1st rise in 4 months

  Article Source:  https://mainichi.jp/english/articles/20250124/p2g/00m/0bu/009000c 

Ideas:

A real wage increase has to do with a decrease in inflation meaning Japanese households had a slight increase in purchasing power.

At the same time, its quite possible the twice-yearly bonus in December might have helped more than a decrease in inflation.

Japanese companies might has had some good profits and or felt they needed to increase bonuses as a way to keep their current employees, and there is a labor shortage in Japan at the present time, which means companies are looking for workers and workers know they have more than one choice for a different job.

Again, as there is a labor shortage it's possible some companies might have given the winter bonus in November instead of December as a way to improve company/employee relations.

It might not have been a company-wide plan but it just happened that companies decided to give their winter bonuses in December instead of November.

As winter bonuses were larger than normal its possible some companies are worried that if they don't increase bonuses they might begin to lose employees to other companies, as employees have many choices if they want a different job.

Inflation has been consistent in Japan since the pandemic and real wages have not kept up with inflation meaning purchasing power of Japanese households have been less than normal since the pandemic.

As shown sometimes inflation does slow down to the point that real wages gain some momentum, but as seen its only had some momentum for two months out of 28 total months, which means the purchasing power of Japanese household has been less than needed.

Real wages are wages adjusted for inflation while nominal wages are wages that includes inflation with means they inflation inflates wages for Japanese households.

Again nominal wages are not what is important for consumers or households as they might mask the real effects of what is happening in an economy.

As seen nominal wages exceeded the consumer price index used to calculate wages, which again, means Japanese household purchasing power lost strength for the reporting month.

And it also means that Japanese consumers probably cut-back again on spending on things except what is needed but not much more.

While a 2.5 percent increase in base pay and wages was good, it really doesn't help Japanese households that much, as inflation easily reduces the purchasing power of increased wages.

And the same with a increase of 1.4 percent in overtime pay and nonscheduled wages, are not that much, and again, inflation can easily reduce any gains made.

Overall, wages and bonuses might be improving for Japanese households but the key is going to be what is inflation going to do and then there is the chance of wage increases in April as the Japanese government is hoping wage increases will be more than in April of 2024, which  was 5+ percent.

Have a nice day!