MNI BRIEF: Japanese Real Wages Stay Negative In April

Japan’s inflation-adjusted real wages fell 1.8% in April from a year earlier, marking the fourth consecutive month in negative territory, unchanged from March’s pace and 20 basis points below expectations, preliminary data from the Ministry of Health, Labour and Welfare showed Thursday.

Bank of Japan officials expect real wages to remain negative for now, as consumer prices stay elevated due to ongoing cost pass-through. 

However, they anticipate a gradual narrowing of the negative gap from April onward, helped by strong nominal wage gains following this year’s spring wage negotiations.

Nominal wages rose 2.3% y/y in April, unchanged from March, while scheduled earnings increased 2.2%, up from 1.4%. 

The April wage data does not yet fully reflect the substantial hikes pledged by large firms, as implementation was limited that month.

The BOJ is closely watching wage data from April to July to assess the scale of pay rises. According to a recent survey by Rengo, Japan’s largest trade union confederation, base pay at major firms rose by an average of 5.32% this year.

Total CPI excluding imputed rents slowed slightly to 4.1% in April from 4.2% in March. Overtime pay rose 0.8% y/y in April following a 0.4% drop in March, while special payments such as bonuses increased 4.1% after surging 14.5% the previous month.

Constant sample data, which smooth sampling fluctuations and are closely tracked by the BOJ, rose 2.5% y/y in April, up from 2.0% in March.