Japanese real wages fell for the second consecutive month in February, driven by higher inflation, according to labor ministry data released on Monday. The dip in real wages comes amid growing concerns about the potential impact of U.S. tariffs on Japan’s fragile economic recovery.
The announcement of sweeping tariffs by U.S. President Donald Trump last week has raised fears of a global economic slowdown, which could further hinder Japan’s recovery. In response, Prime Minister Shigeru Ishiba promised measures to assist domestic industries in coping with the fallout from these tariffs.
Real wages, adjusted for inflation—a key indicator of consumer purchasing power—dropped by 1.2% in February compared to the same month last year. This follows a revised 2.8% decline in January. Inflation, measured by the consumer price index used for calculating real wages, increased by 4.3% year-on-year, slightly down from a 4.7% rise in January. Notably, the inflation calculation includes fresh food prices but excludes rent.
In an effort to ease the economic burden on consumers, Japan’s ruling coalition and the opposition Democratic Party for the People (DPP) agreed on Friday to implement measures aimed at curbing gasoline prices, which have risen in tandem with broader economic challenges stemming from U.S. tariffs.
While real wages were down, nominal wages—which reflect total earnings without adjusting for inflation—showed growth. Regular pay, or base salary, rose by 1.6% in February, slowing from a 2.1% increase in January. Overtime pay, reflecting corporate activity, increased by 2.2%, up from a revised 1.5% in January.
Total average cash earnings, including special payments like one-off bonuses, saw a significant rise of 3.1%, reaching 289,562 yen ($1,981) in February. This was up from a revised 1.8% increase in January, largely driven by a 77.4% jump in special payments.
Looking ahead, Japan’s largest labor union group, Rengo, has confirmed that companies have agreed to raise wages by an average of 5.4% this year—marking the largest pay hike in over three decades. The effects of Japan’s annual spring wage negotiations are expected to be reflected in wage data starting in April or later.
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