Japan’s real wages fell in June for the sixth consecutive month as inflation continued to outpace pay growth, government data showed on Wednesday, raising concerns about consumption-led recovery in the world’s fourth-largest economy.
Inflation-adjusted real wages, a key determinant of households’ purchasing power, fell 1.3% in June from a year earlier, following a revised 2.6% drop in May.
While June’s drop in real wages was the slowest since January, it highlights broader pressures on consumption.
Core inflation has exceeded the Bank of Japan’s (BOJ) target, potentially giving the central bank leeway to raise interest rates as it unwinds years of loose monetary policy, but factors such as geopolitics and tariffs are looming economic risks.
The consumer inflation rate the ministry uses to calculate real wages, which includes fresh food prices but not rent costs, rose 3.8% year-on-year in June, the lowest in seven months.
Although special payments grew by 3% in June from the previous year due to summertime bonuses, they failed to keep up with a rise in inflation, a labour ministry official said.
Total cash earnings, or nominal pay, increased 2.5% to 511,210 yen ($3,476) in June, picking up pace from a revised 1.4% rise in May and the fastest rise in four months.
Regular pay, or base salary, rose 2.1% in June, while overtime pay edged up 0.9%.
Major Japanese firms on average agreed to pay hikes of more than 5% during annual spring wage talks.
The labour ministry had said previously the result may not be significantly reflected in the wage statistics until summer. Smaller firms, which lack labour unions, are slower to implement pay hikes compared with larger corporations.
Wage trends, crucial to sustaining the momentum in consumption, are among key factors the BOJ is monitoring to determine the timing of the next rate hike. The BOJ last week kept its short-term interest rate steady at 0.50%, and said Japan will see rising wages and prices push underlying inflation towards the central bank’s 2% target.
At the same time, the central bank downgraded its assessment of consumption for the first time since March last year, and warned it would stagnate for the time being, squeezed by higher prices.
A labour ministry panel on Monday proposed a 6% increase in the national average minimum wage for this fiscal year, the biggest such jump since at least 2002.
($1 = 147.0800 yen)
(Reporting by Satoshi Sugiyama; Editing by Jacqueline Wong)
