Japanese Yen Falls Again... "No Change to End Negative Interest Rates"

Japan's Real Wages Fall for 21 Consecutive Months
"Wage Increases Must Outpace Inflation"
"Nominal Wage Growth a Positive Sign"

Japan's real wages in December recorded a decline for the 21st consecutive month. However, Bloomberg reported on the 6th (local time) that there will be no disruption to the Bank of Japan's (BOJ) policy of ending negative interest rates.

Ameyokocho Shopping Street, Tokyo, Japan
Photo by Yonhap News Agency

According to data from Japan's Ministry of Health, Labour and Welfare, the rate of decrease in real wages in December was 1.9%, slowing down compared to the 2.5% recorded in November. This is the lowest level since June 2023. Additionally, nominal wages in December increased by 1.0% year-on-year, supported by a 0.5% rise in bonuses. The basic salary in December rose 1.6% compared to a year earlier, marking the highest level since May 2023.

A Ministry of Health, Labour and Welfare official stated, "Real wages in December improved compared to the previous month, and regular employee wages can be seen as maintaining a positive territory."

Harumi Taguchi, Senior Economist at S&P Global Market Intelligence, said, "Overall, wage-related indicators are showing positive trends," and predicted, "The BOJ will show movements to end negative interest rates by April at the latest." She also explained, "Nominal wage increases measured with the same sample data are also recording over 2%, and it is clear that wage increases are spreading."

Prime Minister Fumio Kishida repeatedly urged business leaders at the labor-management-government meeting held at the Prime Minister's Office in Tokyo on the 22nd of last month, saying, "Please raise wages in the spring labor negotiations to a level higher than last year to outpace the inflation rate." This aligns with Governor Kazuo Ueda's statement that "What Japan needs is not cost-push inflation caused by rising energy prices or yen depreciation, but demand-driven inflation based on high wages."

In response to these leaders' demands, Keidanren, Japan's largest business lobby group, created an atmosphere for annual wage negotiations last month by demanding wage increases exceeding the inflation rate. Rengo, Japan's largest labor union organization, ahead of the spring wage negotiations (Chuntu, 春鬪), demanded a wage increase of over 5%, including a 3% basic salary increase and regular promotions. Last year's labor-management negotiations achieved a wage increase of about 3.6%, the highest in 30 years.

Furthermore, major Japanese companies such as Mizuho Financial Group and Aeon Group reportedly promised wage increases of up to 7% for some employees. A survey conducted by the Japan Center for Economic Research (JCER) of 37 economists also indicated that large companies are likely to propose an average wage increase of 3.80% this year.

However, unlike the relatively bright outlook for wage increases in large companies, small and medium-sized enterprises (SMEs) are in a difficult position. According to a survey conducted by the Tokyo Shimbun earlier this month, about 35% of 832 SMEs surveyed do not plan to raise wages, with most citing a lack of funds as the reason.

In response, the Fumio Kishida government is reportedly supporting these SMEs through tax reductions for companies that raise wages and campaigns encouraging companies to pass on cost increases to customers.

Meanwhile, household expenditures in December also decreased by 2.5% compared to the same month last year, marking a decline for 10 consecutive months. Inflation exceeding the wage increase rate is interpreted as placing a spending burden on households. Household expenditures and real wages are indicators closely monitored by the BOJ.

This content was produced with the assistance of AI translation services.