Japan’s real wages fell in April albeit at a slower pace of decline as the central bank looks for early signs of reaching a positive cycle of increasing wages and inflation that would allow it to raise interest rates.
The latest data from Japan’s Ministry of Health, Labour and Welfare reveals that real wages saw a 0.7 percent year-on-year decline in April, marking the 25th month of consecutive declines. However, April’s fall was at a significantly slower pace than March’s 2.1 percent decline after several major companies awarded their salary hikes, the highest in 30 years, during this year’s spring wage negotiations.
Japan’s nominal wages saw a 2.1 percent increase to 296,884 yen ($1,910), up for the 28th month in a row. However, the consumer price index, used to calculate real wages, rose 2.9 percent, exceeding gains in nominal wages and maintaining inflation’s impact as a primary challenge.
Wage negotiations led to an increase in wages among major companies, and the Japan Business Federation reported that they have agreed to a 5 percent monthly pay increase. However, small and medium-sized firms have fallen behind on raising wages with a 3.26 percent hike, according to a Japan Chamber of Commerce and Industry survey.
On a positive note, the ministry’s data revealed a 2.3 percent increase in regular pay in April, in line with the record high Japan saw in October 1994. Meanwhile, overtime pay saw a 0.6 percent annual decline which indicates a softening in corporate strength.
