Japan's Real Wages Decline for 23 Consecutive Months... BOJ Interest Rate Hike?

by Oh Suyon

Published 08 Apr.2024 16:14(KST)

It has been revealed that the real wages of Japanese workers have decreased for 23 consecutive months.

According to the "February Labor Statistics Survey" (preliminary figures) announced by the Japanese Ministry of Health, Labour and Welfare on the 8th, the average nominal monthly wage per worker at companies with five or more employees rose 1.8% year-on-year to 282,265 yen (approximately 2.52 million KRW). However, real wages adjusted for price changes actually decreased by 1.3%.

[Image source=EPA Yonhap News]

This decline is the first in 15 years since the Lehman Brothers crisis. During the Lehman crisis, Japan experienced a decrease in real wages from September 2007 to July 2009.

The rate of real wage decline in February is lower than last year's overall decrease of -2.5%, but higher than the -1.1% decrease in January this year.

Bloomberg News analyzed this as an effect of accelerating inflation. The consumer price inflation rate in February was recorded at 2.8%.

The Japanese government has been encouraging companies to raise wages to escape the prolonged deflation. Japan's largest labor union organization, Rengo (Japanese Trade Union Confederation), announced on the 4th that the average wage increase rate from the Shunto (spring wage negotiations) was preliminarily estimated at 5.24%. The results of this year's Shunto are expected to be reflected in real wages from March onward.

Kota Suzuki, an economist at Daiwa Securities, said, "As wage increases are reflected in salaries and inflation slows down, real wages are expected to turn positive in the middle of this year."

Kazuo Ueda, Governor of the Bank of Japan (BOJ), said in an interview with the Asahi Shimbun on the 5th that if the results of wage increases are reflected in prices, the possibility of achieving the inflation target (2%) will increase.