Real wages in Japan will fall in fiscal 2022, the sharpest in eight years, due to high inflation

TOKYO, May 23 (Reuters) – Japan’s inflation-adjusted real wages fell in fiscal 2022 by the most in eight years, government data showed on Tuesday, as rising living costs outpaced workers’ nominal wages, government data showed on Tuesday.

Labor Department data underscored the challenge for Prime Minister Fumio Kishida’s government to revive the world’s third-largest economy through a virtuous cycle of inflation and wage growth.

Nominal wages rose 1.9% in the last fiscal year that ended in March, the sharpest increase in 31 years, but inflation outpaced those wage increases at 3.8%, causing real wages to rise 1.9% in fiscal 2022. 8% fell, the data showed.

It was the sharpest annual fall since fiscal 2014, when sales tax increases fueled broader price hikes and real wages fell by 2.9%.

The data suggests that wages need to rise even more to outpace inflation and help boost consumer purchasing power and private consumption, which accounts for more than half of the economy.

Big companies have agreed to raise wages by almost 4% this year, the fastest increase in three decades. This is a sign that amid labor shortages in the rapidly aging population, cautious Japanese companies see the need for wage increases to secure a skilled workforce.

In Japan, wages have barely increased in the last three “lost decades” since the bursting of the asset-inflated bubble economy. In comparison, other Group of Seven (G7) economies saw much larger wage increases, around 1.4-fold, over the same period.

Reporting by Tetsushi Kajimoto, edited by Shri Navaratnam

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