Japan Wage Growth

Japan’s nominal wages rose 1.5% year-on-year in August 2025, slowing sharply from July’s 3.4% gain and missing forecasts of a 2.6% increase. Real wages, adjusted for inflation and a key measure of household purchasing power, dropped 1.4% from a year earlier, marking the eighth consecutive monthly decline as price growth continued to outpace pay gains. A steep drop in one-off compensation also dragged down real income figures. The consumer inflation rate the ministry uses to calculate real wages rose 3.1% from a year earlier, well above the Bank of Japan’s 2% target. Consumer inflation has stayed above the central bank’s target for more than three years, but has been decelerating in recent months. That complicates the BOJ’s rate hike plans as policymakers balance softer wages against persistent inflation and growth concerns, expecting a hit from US tariffs.