TOKYO- Japan’s inflation-adjusted real wages in March fell 2.5 percent from a year earlier, marking declines for two straight years, labor ministry data showed on Thursday.
The pace of declines accelerated from the previous month’s 1.8 percent drop as the rising costs of living outpaced nominal wages, the data showed.
Japan is seeing early signs of achieving a positive cycle of rising wages and inflation. Workers’ earnings, however, are still lagging behind rising costs, underscoring the challenges policymakers face in getting companies to boost salaries.
Some economists say they expect real wages to turn positive at some point in the 2024/25 fiscal year.
Nominal wages, or an average total cash earnings per worker, grew 0.6 percent to 301,193 yen ($1,940.30), slowing from 1.4 percent seen in February.
On the other hand, consumer prices in March rose 3.1 percent from a year earlier, slowing slightly from 3.3 percent in February, hovering higher above the Bank of Japan’s 2 percent inflation target and price gains.
Of the total cash earnings, regular pay that determines basic salary rose 1.7 percent , while overtime pay fell 1.5 percent , down fourth months in a row.
Special payments, such as bonuses and other benefits, tumbled 9.4 percent year-on-year in March.
Major Japanese firms have offered more than 5 percent increase in workers’ monthly pay at this year’s annual labor talks, a level unseen in roughly three decades.
But small firms that employ seven out of 10 workers are lagging behind, holding back the pace of wage hikes. Low-paid non-regular workers also account for about 40 percent of the workforce.
The specter of tepid wage gains are dashing policymakers’ hopes for achieving a virtuous economic growth led by durable inflation and solid pay, considered a prerequisite for normalizing monetary policy.
Meanwhile, Bank of Japan board members turned overwhelmingly hawkish at their April policy meeting with some seeing the chance of interest rates rising faster than anticipated, a summary of opinions at the meeting showed on Thursday.
Many in the nine-member board called for steady rate hikes on prospects that inflation could durably stay, or even exceed, the central bank’s 2 percent target, the summary showed.
