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!

Japan Wage talks: Updated Jan. 27, 2025.

 

Japan annual wage talks begin amid high hopes for sustained pay hikes

Article source: https://mainichi.jp/english/articles/20250122/p2g/00m/0bu/029000c

Ideas:

Japan wages, unfortunately, are much less than other OECD countries, so there is a definite need for Japanese companies to increase the wages, despite increasing wages the past two years.

While large Japanese companies will most likely increase wages of 5 percent of more, the challenge is going to be small and midsize companies who probably don't have the profit margins or the resources needed to increase wages.

The Japanese government needs to find a way to help small and midsize companies increase wages, as again, small and midsize companies just don't have the resources to increase the wages.

A wage increase of 6 percent sounds good but will Japanese companies agree to increase wages that much and will there profit margins allow that much increase and most important will stockholders agree to a wage increase of that much if they are publicly traded company.

If large Japanese companies agree to a 6 percent increase can small Japanese companies be able to match what large companies do, when they haven't been able to match large company wages the past two years.

Yes, in a market economy private firms drive economic growth, but sometimes they need a little help or push from the government to get them there, for example small Japanese companies might need a little help.

What the head of Rengo said was correct but unfortunately wage increases in Osaka, Nagoya, and Tokyo might be doable but can small and mid sized companies in the regional economies in Japan be able to match what the large companies in the metro areas do.

If the Bank of Japan does increase the key rate, will it be enough to prevent prices from rising sharply.

The idea is as the key rate increases it will discourage some businesses or households from borrowing and or reduce spending enough to prevent price increases as demand will decrease just enough that keep prices low.

As large companies have increased wages the past two years will they have the appetite to increase wages for a third year. And will they increase wages above the 5.58 rate of last year.

And yes, small firms have not been able to pass-on their higher cost to consumers and probably the main reason might be that many small and midsize firms are suppliers of large companies who might not want to have their supply costs increased which might be a limiting factor for many small companies in Japan.

While large companies might be able to absorb a loss of customers due to price increases, small companies might not be able to absorb the loss of customers.

Have a nice day!