Japan’s real wages continue to fall after adjusting for inflation

Japan's real wages have continued to ease after adjusting for inflation. The preliminary data showed that the nation's cash earnings rose only 0.1% y/y in December. The bonus payments in December were 0.4% lower than the previous year's, dragging the headline wage growth. Regular earnings rose slightly faster by 0.6% in the last 12 months, as compared with 0.3% in the 12 months to November.

Bonus payments are likely to account for an insignificant share of pay until the summer bonus season begins in June. Hence, the forthcoming spring wage negotiations will be the main focus. The Shunto might give smaller base pay rises like it did in 2015. This suggests that the Bank of Japan will be required to cut rates further below zero.