Japan sees the sharpest decline in real wages in nearly two years in May

The latest 2.9% drop in real wages follows a revised 2.0% fall in April, as pay growth continues to lag ongoing inflation.

According to data released by Japan's Ministry of Health, Labour and Welfare on Monday, the country’s real wages adjusted for inflation in May fell for the fifth consecutive month, dropping by 2.9% year-on-year.

This marks the sharpest decline in nearly two years.

The latest drop in real wages follows a revised 2% fall in April, as pay growth continues to lag ongoing inflation.

Government data showed that the total average cash earnings of Japanese workers in May was 300,141 yen, reflecting a 1% increase compared to the previous year. Meanwhile, base salaries increased by 2% in May, and overtime pay rose by 1%. However, all these figures are lower than those reported in April.

In addition, special payments including bonuses, which dropped significantly by 18.7%, contributing to the slowdown in real wage growth during the reporting month.

Meanwhile, consumer prices that were used to calculate real wages rose by 4% year-on-year in May, causing real wages to remain in negative territory.

Although Japanese companies have reportedly agreed to raise wages by an average 5.25% during this year's spring pay negotiations – marking the second consecutive annual increase of over 5% – the impact of these wage increases will only be reflected in the data released later this year.

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