(Bloomberg) — Japan’s workers saw their base pay rise at the fastest clip in 32 years, a result that sends a positive signal to the Bank of Japan as it weighs the prospects for demand-driven economic growth.
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Base pay rose by 3.1% in January from a year earlier, the largest advance since October 1992, the labor ministry reported Monday. Also, a more stable measure of wage trends that avoids sampling problems and excludes bonuses and overtime showed wages for full-time workers grew by 3%, topping that threshold for the first time since July.
Growth in nominal cash earnings slowed in January to 2.8% from the previous year, an outcome that missed the 3% consensus forecast. The data highlighted the impact of price growth, as real cash earnings fell 1.8%, the largest drop since March 2024, and deeper than economists’ forecast of a 1.6% retreat.
Taken as a whole, the data indicate that underlying wage trends remain solid even as workers continue to see their household budgets crimped by persistent inflation. The figures will therefore likely keep the BOJ on track for gradual rate increases as authorities navigate between sustaining growth momentum and normalizing policy settings by taking the rate higher toward neutral.
“The BOJ would confirm through today’s data that wage trends are on track, so there is no need for the bank to change view on monetary policy,” said Naoki Hattori, senior economist at Mizuho Research & Technologies Ltd. “In other words, today’s data would not be a reason to hasten or push back next rate hike.”
The figures come as annual wage negotiations between unions and employers are set to culminate later this week with the initial results of this year’s deals. Japanese workers under the umbrella of Rengo, the largest group of unions, last week demanded the largest pay hike since 1993, signaling that confidence is strong after last year’s talks resulted in the biggest increases in more than three decades.
Their compensation demands also reflect impatience with rising costs of living. Consumer price gains accelerated more than expected in January as fresh food prices rose at the fastest pace in two decades, with the overall inflation rate hitting 4%.
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