Japan’s inflation-adjusted real wages fell 2.9% in May from a year earlier, the fastest decline in 20 months, as wage growth continued to lag behind inflation, government data showed on Monday.
The decline followed a revised 2.0% drop in April and marked the fifth consecutive monthly fall in real wages.
The consumer inflation rate used by the Labour Ministry, which includes fresh food prices but excludes rent, rose 4.0% in May. In contrast, nominal wages grew 1.0% to an average of 300,141 yen ($2,080), slowing from a revised 2.0% increase in April and marking the slowest growth since March 2024.
The main factor behind the nominal pay growth slowdown was an 18.7% drop in special payments, largely made up of one-off bonuses, a ministry official said. Regular pay rose 2.0% and overtime pay increased 1.0%, both decelerating from April.
The ministry noted that the results of spring labour negotiations may not appear in wage data until the summer. Many of the survey respondents are small firms without labour unions and are slower to implement wage increases than larger corporations.
Last week, a separate labour group report showed unionised workers received their highest average pay hike in 34 years. However, the broader wage data has raised concerns about Japan’s economic recovery amid external risks.
Household spending rose in May at the fastest pace in nearly three years, suggesting possible signs of consumption recovery. Wage trends remain a key factor for sustaining consumption and are being closely monitored by the Bank of Japan in considering future interest rate decisions.
Potential U.S. tariffs on Japanese exports may affect corporate earnings, limit future wage growth, and complicate the Bank of Japan’s monetary policy plans.
