Japan's real wages fall for 23rd straight month, dampening Bank of Japan's hopes for 'virtuous cycle'
Real wages in Japan fell for a 23rd straight month, suggesting that high inflation is still biting into consumer spending power in the country.
Labor ministry data released Monday showed that real wages fell 1.3% in February from a year ago, accelerating from a revised 1.1% drop in January. Special payment
On a nominal basis, however, wages rose 1.8%, with the base pay component climbing 2.2%. The data showed special payments, which include bonuses, slipped 5.5% year-on-year.
The data comes after Japan's unions secured the highest wage increases in 33 years. But those pay hikes benefit only a fraction of Japan's workers, given only 16.3% of workers are unionized in the country and most unionized workers are concentrated in large companies.
That suggests any "virtuous cycle" between wages and prices could be limited as workers in small and medium enterprises face higher prices amid stagnant wages.
Inflation has surpassed the Bank of Japan's 2% target every month since April 2022. If real wages continue to decline, consumers may choose to save instead of spend, thereby generating little demand and impetus for prices to rise.
Pay increases for union workers could trickle down and broaden, Hirofumi Suzuki, chief FX strategist at Sumitomo Mitsui Banking Corporation and head of its research group, told CNBC. He noted this year's "wage hikes have also been relatively strong, and appear to be in line with the Bank of Japan's virtuous cycle."
Suzuki said the latest figures from the Japanese Trade Union Confederation, also known as Rengo, estimate a 3.2% nominal wage growth for SMEs, not far off the 3.7% for large enterprises.
The Bank of Japan's regional economic assessments for April also indicated that the employment and income