Japanese workers' real wages have increased for a fourth straight month, marking the longest stretch of gains in four years, which strengthens the rationale for the Bank of Japan to raise interest rates later this month.
Data released by Japan's Ministry of Health, Labour and Welfare on Friday showed inflation-adjusted wages rose 1.9% year-on-year. This figure accelerated from a revised 1.4% increase the previous month, exceeded economists' forecast of 1.7%, and represents the longest period of continuous growth since late 2021.
Nominal wages grew 3.5% from a year earlier, also surpassing the market consensus expectation of 3.1%. Within this, base pay increased by 3.4%. A separate indicator that aims to avoid sampling bias, which is closely watched by Bank of Japan officials, showed wages for full-time workers rose 2.6%. Both measures point to robust underlying momentum.
The release of these wage figures comes as the Bank of Japan's monetary policy meeting is scheduled for June 15-16. Market expectations are widespread that the central bank will lift its benchmark interest rate by 25 basis points at this meeting. The sustained and solid wage growth indicates resilience in domestic demand, further reinforcing the case for advancing policy normalization.
Informed sources indicated this week that Japanese authorities are set to consider a rate hike and discuss the potential for further increases later in 2026.
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