Japan's Real Wages Fall for Second Consecutive Year Amid Rising Inflation

Japan's Real Wages Fall for Second Consecutive Year Amid Rising Inflation

In Japan, inflation-adjusted real wages experienced a 2.5 percent decrease in 2023, marking the second consecutive year of decline. This decline was largely attributed to wage increases that failed to keep pace with the rising inflation rates.

The recent decline in real wages was the second sharpest since 1990, when comparable data first became available. The only other instance of a steeper decline occurred in 2014 when Japan increased its consumption tax rate from 5 percent to 8 percent, resulting in a 2.8 percent drop in real wages.

In the 2023 "shunto" spring wage negotiations, the average wage increase for regular employees was recorded at 3.58 percent, representing the highest increase in 30 years. Despite this positive development, the consumer price index, excluding imputed rent from owner-occupied dwellings, jumped by a significant 3.8 percent, eroding the gains made in nominal wages.

Total cash earnings, including both scheduled cash earnings and special cash earnings, saw a modest increase of 1.2 percent, reaching 329,859 yen per month. However, this growth was not sufficient to offset the impact of inflation, resulting in a decrease in real wages.

Breaking down the total cash earnings by employment type, full-time workers' salaries increased by 1.8 percent to 436,849 yen, while part-time workers' earnings rose by 2.4 percent to 104,570 yen. Both of these increases set new record highs.

Since 1996, real wages in Japan have exhibited a continuous downward trend. With 2020 serving as the base year, real wages in 2023 were recorded at 97.1, indicating a significant decline from the peak of 116.5 reached in 1996.

Preliminary figures also suggest that real wages for December 2023 experienced a 1.9 percent decrease compared to the same month in the previous year, extending the consecutive months of year-on-year decreases to 21.