Japan data – February real wages decline again, -1.2% y/y (2nd time in a row)

Japan’s inflation-adjusted real wages fell 1.2% year-on-year in February, marking the second consecutive monthly decline. The drop follows a revised 2.8% fall in January and highlights the continued pressure on household purchasing power from elevated inflation.

The consumer inflation rate used to calculate real wages — which includes fresh food but excludes rent — rose 4.3% in February, only slightly easing from January’s 4.7%. Despite nominal income growth, this persistent inflation eroded wage gains.

Total cash earnings, or nominal wages, rose 3.1% year-on-year in February, accelerating from a revised 1.8% increase in January. The figure was supported by a surge in special payments, such as bonuses, which jumped 77.4% compared to the previous year.

Overtime pay, often seen as an indicator of business activity, climbed 2.2% in February, up from January’s revised 1.5%. Regular pay, however, rose at a slower pace of 1.6%, down from 2.1% in the previous month.

Looking ahead, wage data may strengthen from April onwards, as the effects of this year’s spring wage negotiations take hold. According to Rengo, Japan’s largest trade union federation, companies have agreed to an average pay hike of 5.4% in 2025 — the biggest increase in over three decades