Japan's Real Wages: Updated August 7, 2025

Japan's real wages fall 1.3% in June despite summer bonuses

Article source:  https://mainichi.jp/english/articles/20250806/p2g/00m/0bu/012000c

Ideas

It should be remembered that 70 percent of the Japanese workforce are not working at large Japanese companies but rather small and mid-size companies that maybe don't have the resources to pay large summer bonuses.

What sometimes happens, in many economies is as inflation continues on wages too will begin to increase as money flows through the economy but Japan is in a completely different universe and normal economic idea are not working.

Inflation can be both positive and negative depending on other factors in the economy such as the movement of money and the interest rate at the time.

And again, as mentioned 70 percent of the Japanese economy is not large companies but small and mid-size companies that probably don't have the resources to pay the same wage increases as large companies or even the same bonuses as large companies, which means inflation for many in the Japanese economy could still be higher the the wage increases of some or many.

All of the data that is given in this article is good but a better question might be what was the average wage increase for small and mid-size companies and what kind of summer bonuses did small and mid-size companies get during the past year.

Everyone wants to talk about large Japanese companies like they are the back-bone of the Japanese which they aren't as small and mid-size economy actually drive the economy even more.

Wage increases of course are very important, for the Japanese economy, and for every economy but what needs to be included in article discussions is what is happening with the small and mid-size companies in Japan as it seems they are being left behind and not getting the wage increases needed to help Japanese families not to mention the need to grow the economy.

Nominal data is useless for the average Japanese household as it includes wages plus inflation which distorts the actual actual purchasing power of consumers in the Japanese economy. Nominal data is like a fantasy of what you might think is good but in reality is a distortion.

Every recent Prime Minister has said they are going to increase wages but the wage increases so far hasn't really been completely significant for the average Japanese household just yet.

The challenge is wages in Japan, in relation to other OECD economies has been decreasing for the past three decades and its just been the past two years that wage have finally began to increase enough to maybe just maybe Japanese workers can finally begin to see some daylight at the end of the long three decade tunnel.

Interest rate increases can be a positive and a negative factor in an economy such for the banking system they can be a positive but at the same time can be a negative.

For the average business they can a negative in that loans will now be more expensive and especially for small business who need loans to maybe get their inventory orders it can be a major negative for them.

For household their mortgage payments could increase along with interest rates on the use of credit cards too.

But at the same time increasing they key interest can be an incentive for an economy to slow down which in effect could potentially reduce inflation.  

But again the Japanese economy, for many reasons has been exactly operating on sound economic factors and a key rate increase by the Bank of Japan might not work and could be for of a negative than a positive. Only time will tell.

Have a nice day