Japan Reports Biggest Jump in Nominal Wages in 26 Years

Japan reported the biggest jump in nominal wages in nearly 26 years in December, due to strong wage growth to offset price hikes, which is considered as a critical condition for the Bank of Japan to pull back its ultra-easy monetary policy.

On Tuesday, the Ministry of Labor released data showing that real wages, which adjust for inflation, increased by 0.1% in December from the same month a year ago, the first increase in real wages in nine months.

Nominal wages, meanwhile, increased by 4.8% year over year in December, the highest annual increase since January 1997’s 6.6%.

It was in line with the 4.8% increase in the ministry’s preferred measure of inflation for determining real wage increases, which includes the cost of fresh food but not the comparable rent paid by property owners. This rate of inflation was the highest seen since May of 1981, when it hit 5.1%.

The nominal salary growth in Japan in 2022 was 2.1%, the highest annual increase since 4.4% in 1991. Despite a 0.6% increase in nominal wages from 2020 to 2021, inflation at four-decade high levels caused real wage growth to go into negative territory, at -0.9%.