Japan Real Wages: Updated June 7, 2025.

Japan's real wages in April fall 1.8%, down for 4th straight month

Article source:  https://mainichi.jp/english/articles/20250605/p2g/00m/0bu/016000c

Ideas

The Japanese economy and Japanese households are in a difficult situation as inflation continues on in Japan since the pandemic and wages while improving haven't been able to keep up with inflation.

The problem started many years ago when as its been suggested that Toyota back in the early  2000's decided not to give wage increases and then all other companies followed suit and then it almost became a yearly situation.

Maybe if wages had been paid yearly Japan might not be in this situation now. 

Nominal wages include inflation so it shows that inflation had increased by 2.3 percent for the 40th straight month, which is not good for Japanese households, low-income and fixed income groups in Japan.

Real wages the real purchasing power of Japanese households and not nominal wages as they only show the results of inflation in the economy.

The spring wage negotiations might have been good for some companies but all companies, such as small and mid-size companies probably didn't get the same wage increases as the large name-brand companies in Japan.

It must also be remembered that up to 70 percent of the Japanese work-force don't work for the large name-brand companies in Japan, but small and mid-size companies, which again, don't have the resources need to pay the same wages as the large companies.

Japan used to be a de-flation situation where prices were low and continued to be low as a result of low consumer spending in Japan and because of the continued lack of wage increases over many months and years in Japan.

Perhaps, as in any society, Japanese consumers go used to the low prices and now with 40 months of continue price increases, Japanese consumer are not spending in the economy as they normally would.

Workplaces of five more more employees would probably be considered a small company, and again small Japanese companies just don't have the resources needed to pay the same wages as the large Japanese companies do.

And then add in the price increases for the 42nd straight month and consumer purchasing power in Japan is even less than normal.

Yes, the wages increases might be reflected in the wages some, but they are still over-shadowed by the continued inflation in Japan that doesn't seem to be ending anytime soon.

The problem is Japan is a resource-poor country which means it has to import much of what is needs from energy to food and if global prices are higher than normal and if the Japanese yen is weak, that means prices in Japan are going to even higher than normal.

Consumer spending in Japan is around 50 percent of Japan's GDP, which is less than the 65 percent of GDP in the US. Which means maybe consumer spending in Japan is just not large enough to really drive economic growth.

If consumer spending in Japan were 50 percent or even 57.5 percent that might be enough to reach the economic growth needed in the Japanese economy.

But yes, without continued wage growth consumer spending in Japan is not going to improve enough as Japanese consumers are not going to spend if they don't have enough disposable income left after paying their monthly bills.

The Bank of Japan for many years, maybe since 2012, has been using a monetary policy of almost zero percent interest rates to improve the Japanese economy without much success. 

It was a good strategy but it just didn't work and the Japanese economy, at that time and now has been stagnant and hasn't really improved in its growth.

Moving to a normalization of monetary policy too might not work as the BOJ has increased the key rate twice over the past year and again without much real affect on the Japanese economy, as inflation has continued to increase yearly.

Increases in July, November, and December was good and needed but they didn't overcome the 26 month decline in real wages which is very important for Japanese consumer spending power in the Japanese economy.

If Japanese consumers don't have enough extra income or disposable income after paying their monthly bills they are not going to spend in the Japanese economy such as entertainment, eating out at restaurants, online shopping, and of course summer trips this summer during the Obon season.

Have a nice day!