Japan's Real Wages Rise, Boosting Optimism for Wage Momentum
Japan's seasonally adjusted real wages increased by 0.6% year-over-year in December, driven by winter bonuses, according to preliminary government data. This marks the second consecutive month of growth after November's revised 0.5% increase.
The positive figure is attributed to a 6.8% surge in special payments, primarily from companies' winter bonuses. Total cash earnings, including bonuses, rose 4.8% year-on-year to 619,580 yen ($3,991.11).
However, the consumer inflation rate used to calculate real wages accelerated to 4.2% from 3.4% in November, reaching its highest level since January 2023. This indicates that wages are not keeping pace with rising prices.
Regular pay, or base salary, increased by 2.7% in December from a revised 2.5% in November. Overtime pay, a measure of business strength, grew 1.3% for the month from a revised 1.4% in November.
For the entire year of 2024, overall base salary experienced its fastest growth in three decades, while special payments saw their highest increase since 2001. However, real wages for the year dipped 0.2% compared to 2023, marking their third consecutive annual decline.
Despite the overall decline, real wages improved during bonus seasons last year, aided by regular pay increases and bonus payments. Officials expressed optimism that this trend could continue if consumer inflation cools down.
Japanese companies have agreed to an average wage hike of 5.1% in 2024, marking the largest increase in three decades. Unions are pushing for wage increases of at least 5% in 2025, targeting a minimum 6% increase for smaller firms to address income disparities.