(March 9): Japanese workers’ wages adjusted for inflation rose for the first time in 13 months, a development that may bolster consumer sentiment and support both the Bank of Japan and the government in their pursuit of key policy goals.
Real wages increased 1.4% from a year earlier in January, exceeding economists’ median forecast of a 0.9% gain, the labour ministry reported Monday (March 9). The gain comes after the measure fell every month in 2025, and it was the fastest increase since May 2021.
Nominal wages rose 3% from the previous year, also beating analysts’ expectations. Base pay climbed 3%, the biggest increase in more than 33 years, and a more stable measure that avoids sampling problems and excludes bonuses and overtime showed full-time workers’ wages increased 2.2%.
“Real wages rose because prices have come down somewhat due to policy effects but whether this trend will continue is another question,” said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute. “Oil prices have been rising quite sharply lately, so it is hard to expect this positive trend to persist.”
Japan’s key inflation gauge cooled in January to the slowest pace in two years as food and energy prices stabilised. Japanese Prime Minister Sanae Takaichi’s economic measures, including utility subsidies, helped ease the cost of living burden on households and food inflation slowed in part due to comparison with a year earlier when those costs spiked. Both of those effects are expected to fade over time.
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Even so, the development will be welcomed by the BOJ. If higher wages fuel personal spending, it would underpin demand-driven price pressure. Achieving a virtuous cycle linking wages, consumption and prices is a key condition that would allow the central bank to continue normalising policy with rate increases. Takaichi also seeks to generate self-sustaining growth.
BOJ Governor Kazuo Ueda said last week the bank is still rolling back the degree of easing in its settings as it pursues stable 2% inflation, adding that wages need to rise “at an appropriate pace".
Authorities are widely expected to keep the benchmark rate unchanged when they next set policy on March 19, after the US-Israeli conflict with Iran injected fresh uncertainty into the global outlook. Even so, pricing in the overnight swaps market indicates that traders see a roughly 61% chance of a move by April.
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Investors are also watching the outcome of this year’s wage negotiations, which will culminate later this month. Last week the nation’s largest labour federation Rengo announced that its member unions are seeking an average pay increase of 5.94%, indicating wage growth momentum is continuing.
A year ago, unions under Rengo demanded a 6.09% increase and ultimately secured a 5.25% raise, the largest hike in 34 years.
Economists broadly expect this year’s settlements to remain elevated, with a median forecast of a 5% increase. A persistent labour shortage is a key driver. A majority of firms reported full-time worker shortages for a fourth straight year, according to a report by Teikoku Databank in February.
Strong corporate earnings may help sustain the trend. Corporate profits rose from a year earlier for five consecutive quarters in the three months through December, according to Finance Ministry data released earlier this month.
Company responses so far also appear supportive. Kewpie Corp has offered a total pay increase of about 6%, while Dai-ichi Life Holdings Inc has promised a 7% rise.
That momentum appears to extend to exporters as well, despite pressure from higher US tariffs over the past year. Automakers, including Mitsubishi Motors Corp and Mazda Motor Corp, have already pledged wage increases matching workers’ demands ahead of other industries.
“I expect workers to achieve overall wage growth of around 5% in the current round of wage negotiations,” Kodama said, adding that nonmanufacturers could be a driver of sustained momentum.
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