Japan's Real Wages Continue to Decline Amid Inflation Concerns

Japan's real wages have decreased for the twelfth consecutive month, according to data released on Monday. This decline is attributed to nominal wage growth being slightly lower than the slowing consumer inflation. According to Jin10, after raising interest rates by 25 basis points to 0.75% in December, wage trends have become a crucial factor for the Bank of Japan in determining the timing of its next rate hike. As a key indicator of consumer purchasing power, inflation-adjusted real wages fell by 0.1% year-on-year in December. This continues the shrinking trend that began in January 2025, although the decline has narrowed to the lowest level in this contraction cycle. The annual data released on Monday shows that Japan's real wages fell by 1.3% in 2025. This marks the fourth consecutive year of decline since consumer inflation began exceeding the Bank of Japan's 2% target in 2022.