Japan Data

Soaring Inflation Means Real Wages Drop in Japan Despite Pay Hikes

Economy Work

Spurred on by the labor shortage, Japanese companies made big pay increases in 2023, but real wages fell as prices continued to spiral upward.

In December 2023, real wages, which reflect the effects of price changes on total cash earnings (nominal wages), decreased by 1.9% in Japan compared to the same month the previous year, according to preliminary statistics from a Ministry of Health, Labor, and Welfare monthly labor survey, based on companies that employed five or more workers. Real wages have now been falling for 21 consecutive months.

Year-on-Year Changes in Real Wages in Japan

In 2023, nominal wages, including basic wages and overtime pay, increased by 1.2% to an average of ¥329,859 per worker. The consumer price index (comprehensive, excluding owners’ equivalent rent), on the other hand, rose by 3.8%, reaching the highest level in 42 years, so real wages fell year-on-year by 2.5% for the second consecutive decrease. The last time such a drop was seen was nine years ago in 2014, when real wages fell by 2.8% due to the hike in consumption tax from 5% to 8%.

In the 2023 shuntō (spring wage offensive), record labor union demands were fully met in many cases, resulting in the biggest wage increases for 30 years. Even so, they could not keep up with the soaring commodity prices.

Year-on-Year Changes in Nominal Wages and Real Wages in Japan

(Translated from Japanese. Banner photo © Pixta.)

inflation wages