Japan's Real Wages: Updated April 10, 2025.

Japan's real wages fall 1.2% in February, down for 2nd straight month

Article source: https://mainichi.jp/english/articles/20250407/p2g/00m/0bu/005000c

Ideas:

Real wages is what matters as it is the amount that households/consumers can use in the economy while nominal wages are wage plus inflation which can be a distorted number or not a true number for households or consumers.

At the same time the 289,562 yen might just be an average amount as there might be some above and some below that amount, as the Japanese economy has a lot of income inequality at this time, which illustrates the difference between the highest incomes and the lowest incomes.

A decrease of 1.2 percent might not seem like that much but if you living from paycheck to paycheck it could be a lot and it you are family of four that could really affect a families disposable income.

It's quite possible or not, that anytime the Japanese government decides to implement subsidies for utility bills, consumer prices increase as whomever is increasing prices due to households having a little more disposable income.

An increase or decrease, however you want to see it, from 4.3 to 4.7 is still a large increase in consumer prices as the 4.3 percent might be too much for many Japanese families, and especially the low-income and fixed income groups.

The Bank of Japan and the Japanese government should not rely too much on wage increases as whatever the large companies offer will not be the same for the small an midsize companies who just don't have the resources needed to match the large company increases.

Up to 70 percent of the Japanese workforce is employed by small and midsize companies which it quite possible, unfortunately, that they won't get the same wage increases as the large company workers, which then means the might be still have to struggle with high prices.

For the large Japanese companies an increase of 5.42 percent is very good as it is close to helping those workers overcome the inflation situation in Japan, but again, the real test is going to be what are the wage increases going to be for the 70 percent small and midsize company workers.

Yes, consumer purchasing power is what is important and will the wage increases improve the purchasing power of all workers in Japan, large company midsize company, and small company workers.

The Bank of Japan might have been thinking about increasing the key rate but with the US administrations on again and off again tariff situation the BOJ just might wait until they know exactly what is going to happen.

Inflation continues to hurt real wages in Japan as workers are probably thinking when is it going to end as ever since the pandemic inflation has been part of the daily life of most Japanese households.

And the real challenge is if real wages continue to decrease in both small and midsize companies then most likely their worker's disposable income is decreasing which means there is or will be less consumer spending in the Japanese economy.

Wage increases while implemented in April of each fiscal year and seen in monthly paychecks might not be enough for all workers as it has to be a concerted effort for all companies if there is going to be a increase in consumer spending which is needed to improve economic growth.

If only 30 percent of workers in Japan get wage increases that are enough and the other 70 percent don't that means there is not going to be enough consumer spending in the Japanese economy to increase economic growth.

And again, depending on what is going to happen in the US, the Bank of Japan is probably going to wait at least three months to see what the US is going to do with with the tariff situation.

Have a nice day!