TOKYO: Japanese workers’ real wages fell in every month of 2025, underscoring the persistence of inflation and bolstering the case for Prime Minister Sanae Takaichi to continue down a more expansionary fiscal path after she secured a sweeping election victory last Sunday.
Real wages slipped 0.1% from a year earlier in December, the Labour Ministry reported yesterday.
Economists had expected the reading to turn positive for the first time in a year after inflation moderated as a result of policy measures intended to reduce living costs.
Real wages for 2025 overall declined for the fourth year running.
Still, nominal wages rose 2.4% from the previous year, while base pay climbed 2.2%, pointing to underlying momentum as pay negotiations that culminate in March continue.
A more stable gauge that avoids sampling problems and excludes bonuses and overtime showed full-time workers’ wages increased 2.1%.
The prolonged decline in real wages has fuelled public frustration, helping propel Takaichi’s ruling coalition to a decisive win after she pledged to help households cope with living costs.
The ruling coalition secured 352 seats in Sunday’s election, NHK reported yesterday, with the Liberal Democratic Party (LDP) taking 316, the most ever for a single party in a Japanese election.
Takaichi had vowed to accelerate discussions to cut the sales tax on food for two years.
“It’s not that regular wages have fallen significantly, but rather that bonuses have not increased as much as most people expected at this stage,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities. “I don’t think that the basic trend in wages is that weak.”
Economist Taro Kimura said: “The central bank has said it will watch this year’s spring wage negotiations to assess the timing of a further reduction in stimulus. Solid pay growth may also add to public support for Takaichi.”
Higher prices have already weighed on consumer demand. Household spending fell more than expected in December, with especially sharp declines in discretionary items such as clothing.
Looking ahead, economists expect real wages to pick up as inflationary pressures begin to ease, particularly for food.
The Bank of Japan (BoJ) projects its key inflation gauge will average below 2% in the fiscal year starting in April, according to its economic outlook report last month.
A member of a government advisory panel said last month that Japan should be ready to promptly declare an exit from deflation once stable growth in real wages and a positive gross domestic product output gap are confirmed.
The BoJ noted in its outlook report that nominal pay is likely to grow at a high level, as this year’s spring labour negotiations are expected to deliver solid wage increases across a broad range of companies.
In the ongoing pay talks culminating in March, Japan’s largest labour union federation Rengo is seeking wage hikes of at least 5%, matching last year’s demand.
Early signs have been positive, with companies including Dai-ichi Life Insurance Holdings Inc and Kewpie Corp reportedly signalling plans to raise wages by 6% or more. — Bloomberg
