18-Month Decline in Japan's Real Wages Despite Economic Stimulus Package

Rising prices squeeze consumer spending power as inflation-adjusted real wages drop 2.4% from a year earlier, increasing pressure for substantial wage hikes.

• Japan's inflation-adjusted real wages slipped for the 18th consecutive month in September, dropping by 2.4% from the previous year due to increasing prices, which has subsequently squeezed consumer spending power.
• The decline has elevated pressure for substantial wage hikes from labour groups. Japan's largest labour organisations, Rengo and UA Zensen, are expected to demand pay increases of 5% or more and 6% respectively in upcoming negotiations.
• The government, led by Prime Minister Fumio Kishida, has recently introduced a 17 trillion yen ($113.72 billion) economic stimulus package that includes cutting annual income tax and other taxes by 40,000 yen ($267.58) per person, and allocating 70,000 yen to low-income households.
• Despite the economic stimulus, special wage payments fell 6% year-on-year in September, following a revised 6.3% decline in August. The indicator tends to fluctuate in non-bonus seasons.
• Household spending continued to fall, decreasing 2.8% in September from a year earlier, marking seven months of consecutive decline. A rise in expenses for eating out, transportation, and automobile-related spending was noted due to increased outings, while spending on food, housing, furniture and household goods decreased due to rising prices.

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The Japan Times Reuters CNA