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

Japan Wage Growth: Updated Dec. 27, 2024

 

Japan's wage growth likely to outpace inflation in FY 2024, 2025

Article Source:  https://mainichi.jp/english/articles/20241226/p2g/00m/0bu/031000c

Ideas:

If nominal wages do exceed inflation that might be a good sign for the Bank of Japan to consider increasing the key interest rate.

It might be the first time in many years that nominal wages has exceeded inflation, as Japan has been stuck in an inflation situation for a long time.

But it might be too early to tell as inflation in Japan keeps increasing or has kept increasing for many months.

It must be remembered that even though many large companies increased wages by at least 5 percent, up to 70 percent of Japanese workers don't work for large companies but small or midsize companies many or some of them didn't increase wages by that much. 

So its still quite possible that many Japanese worker's nominal wages are still less than inflation in Japan, which means their disposable income is not good enough to spend in the Japanese economy.

The Japanese government needs to find a way to help the small and midsize companies improve their profit margins so they too can give good wage increases to their workers.

A new report has suggested that Japan is like 22nd among OECD countries related to annual incomes and even South Korea has surpassed Japan, and they are last among the G7 countries.

Its a perplexing situation as to what has happened to Japan the last 30 years or so, when it was at one time one of the richest countries in the world.

Labor unions can demand wages increases all they want and even another 5 percent increase is good but are companies willing to do it again, and will small and midsize companies also increase wages by 5 percent or more and match what the large companies are going to do.

The government too can encourage wage increases but if many companies profit margins are too thin, there might be little chance for some companies to increase wages.

Some time ago, it was reported that many Japanese companies were sitting on huge sums of money and not using it for their workers. That might have been up to 10 years ago, and it might be the same today with some companies.

It has been suggested that maybe Japanese companies have transformed too much into western style companies as before Japanese companies used to take care of their workers, but the priority today is stockholders and stockholder value and not Japanese workers like it was many years ago.

Have a nice day!