MNI BRIEF: Japan's May Negative Real Wage Widens

Japan’s inflation-adjusted real wages, a key gauge of household purchasing power, remained negative for the fifth straight month in May, falling 2.9% y/y following April's 2.0% decline, preliminary data from the Ministry of Health, Labour and Welfare showed Monday.

The drop marks the steepest decline since September 2023, when real wages also fell 2.9%.

Hefty pay increases agreed during spring wage negotiations are gradually being reflected in the data through July, helping narrow the negative wage gap.

According to a final tally by Japan’s largest labour union group Rengo, workers at 5,162 affiliated firms secured an average pay increase of 5.25%, the biggest annual wage rise in 34 years.

Total CPI excluding imputed rents rose 4.0% y/y in May, slowing slightly from 4.1% in April.

Nominal wages rose 1.0%, down from April’s 2.0% gain. Scheduled earnings increased 2.1%, unchanged from April. Overtime pay rose 1.0% y/y, slowing from 1.3% in April, while bonuses and other special pay dropped 18.5% after rising 1.3% the previous month.

The Bank of Japan’s preferred constant sample data, which exclude sampling volatility, rose 2.6% in May, slightly up from 2.5% in April.

BOJ officials expect real wages to stay negative for now as the CPI remains elevated due to continued pass-through of high labour and material costs.