Japan Real Wages: Updated May 22, 2025.

Japan's real wages fall 0.5% in FY 2024, down for 3rd straight year.

Article source: https://mainichi.jp/english/articles/20250522/p2g/00m/0bu/002000c

Ideas

To be honest, Japan is not acting like an advanced economy as it seems to lack behind many up and coming economies these days.

Japan's per capita income lags behind many advanced economies and the way that pay growth is lagging behind prices is a telling concern for the Japanese economy.

There was a time in the late 1980's where some thought Japan was going to surpass the US economy but those days seem long gone.

Nominal wages are not important as they don't tell the real story related to households and their spending power which is way behind related to price increases in Japan.

This situation has been a long time in the making but its seems the Japanese government or Japanese businesses were not interested in trying to fix or help the situation, as they were only interested in their small piece of the pie in Japan.

Some have called this the 3 decade loss of Japan which before it was called the lost decade when economic growth was less than normal or less than expected.

Nominal wages include inflation so they really are not that important as what really matters is real wages and purchasing power for an economy.

Real Wages indicate how much a Japanese household can really spend in the economy while nominal wages again include inflation which might be considered inflated wages with no real purchasing power.

Real wages need to be considered against inflation to see how much purchasing power Japanese households really have and how much disposable income they have left after paying their bills.

Unfortunately many Japanese companies were reluctant to increase wages for their workers as they were more focused on taking care of their shareholders instead of their stakeholders working in the company.

At the same time, inflation have been creeping up steadily causing many companies to have very weak profit margins and when inflation really hit they were not prepared how to handle the continued increase in raw material costs, energy costs, and especially the need to increase wages.

Yes, the problem is many companies were late in increasing wages and the 5 percent wage increases given in 2024 were too little too late as they should have been giving wages increases many years before.

At the same time it must be remembered that up to 70 percent of the Japanese workforce doesn't work for the large name-brand companies but small and midsize companies which don't have the resources that large companies have and can't pay the same wage increases.

All previous Japanese Prime Ministers have tried different strategies to improve the Japanese economy and most have failed to do what they wanted to do or the results were only short-term fixes but then the same situation returned or was worse.

Focusing on small and mid-size companies is good but can they all be helped as its going to take a lot of resources to help that many of companies and or that many Japanese households that work for small and mid-size companies in Japan.

Again this is a situation that has been known for a long time as wages in Japan have steadily been declining compared to wages in other advanced economies but know one seemed to notice or pay attention to it until long-term inflation kicked in and many Japanese households and business were significantly challenged.

This situation, has been known for a very long time as many have known that Japan was/is falling behind many other advanced economies and some have even suggested Japan should be like Switzerland and not worry too much about its place in the global economy.

But unfortunately, these days, no country is a island unto itself, and no pun intended related to Japan as an island nation, all countries and economies these days are too interconnected for Japan to isolate itself from the rest of the world.

Have a nice day!