Japan’s real wages grow for the fifth consecutive month in May, but at a slower pace

Golden Ten Data reported on July 7 that data released by the Japanese government on Tuesday showed that Japan’s real wages in May rose by 1.4% year-on-year, marking the fifth consecutive month of growth. However, the growth rate has slowed as consumer inflation picked up again. The average nominal wage in May (i.e., cash income) increased by 3.2% year-on-year to 311,165 yen (approximately $1,917.69), lower than the revised 3.6% increase in April. As the effects of the Iran war began to be reflected in consumer prices, consumer inflation accelerated, causing the year-on-year growth rate of real wages in May to slow to 1.4%, down from the revised 2.0% in April. Base wages in May grew by 3.0% year-on-year, compared to a revised increase of 3.3% in April. Overtime pay rose by 2.9% year-on-year, lower than the revised 4.8% in April. Although Japanese companies have achieved an average annual wage increase of over 5% for the third consecutive year, the cost of living is likely to continue rising in the coming months, as the weak yen drives up import costs and the previous increase in energy prices gradually passes through to the prices of various consumer goods. The Bank of Japan raised interest rates last month to their highest level in 31 years and stated that sustained increases in wages and prices are prerequisites for further rate hikes.