In March 2025, Japan’s inflation-adjusted real wages decreased by 2.1% year-on-year, marking the third consecutive monthly decline. This trend reflects the ongoing impact of persistent inflation on household purchasing power.
The consumer inflation rate, used by the Ministry of Health, Labour and Welfare to calculate real wages, stood at 4.2% in March. This rate, which includes fresh food prices but excludes rent, was slightly down from February’s 4.3% but remains elevated due to rising food costs.
Regular pay, or base salary, increased by 1.3% in March, maintaining the same pace as in February after a downward revision. However, overtime pay declined by 1.1%, the first drop since September and the steepest since April of the previous year. This decrease suggests a potential softening in business activity.
Total average cash earnings, or nominal pay, rose by 2.1% to 308,572 yen ($2,132) in March, a slower growth compared to the revised 2.7% increase in the previous month.
While major Japanese firms agreed to more than 5% pay hikes during the annual spring wage negotiations in March, the effects of these raises are expected to appear in wage statistics from April onwards.
The continued decline in real wages and the drop in overtime pay contribute to growing concerns over Japan’s economic outlook, especially ahead of the first-quarter GDP data, which many economists anticipate will show a contraction.
These wage trends are closely monitored by the Bank of Japan (BOJ) as they play a crucial role in shaping monetary policy decisions. The BOJ has indicated that sustained wage increases are a prerequisite for adjusting its current low-interest-rate policy.
In summary, the decline in real wages and overtime pay in March underscores the challenges faced by Japanese households amid persistent inflation and highlights the importance of wage growth in supporting economic recovery.
Source: Reuters
