Overview

• Real wages in Japan fell 1.3% in February from a year ago, marking a 23rd consecutive month of decline due to inflation outpacing nominal wage growth.
• Nominal wages rose 1.8% year-on-year, with base pay up 2.2%, but special payments, including bonuses, decreased by 5.5%.
• The decline in real wages comes despite Japan's unions securing the highest wage increases in 33 years, benefiting only a small fraction of workers.
• Inflation has exceeded the Bank of Japan's 2% target every month since April 2022, challenging the central bank's efforts to stimulate a 'virtuous cycle' of wage and price growth.
• The Bank of Japan ended its negative interest rate policy last month and is unlikely to revive it or yield curve control policies, awaiting further data before considering policy adjustments.