Inflation-adjusted wages for Japanese workers rose at the fastest year-on-year pace since 2021, providing support for the Bank of Japan to consider an interest rate hike as early as this month. Data released by Japan's Ministry of Health, Labour and Welfare on Wednesday showed real wages increased by 1.9% year-on-year in February, marking the second consecutive month of growth and surpassing economists' forecast of a 1.3% rise. Nominal wage growth reached 3.3%, exceeding the market consensus expectation of 2.7%.
Basic wages rose by 3.3%, the largest increase in nearly 34 years. A core fixed-wage indicator, which excludes bonuses and overtime pay to avoid statistical sampling bias, showed a 3.1% year-on-year increase for full-time employees, the largest gain since comparable data became available in 2016. This wage growth comes as the Bank of Japan has been seeking reliable signals that sustained pay increases will drive consumer spending, thereby fueling demand-driven price rises.
The rise in real wages was aided by a temporary cooling of inflation, partly due to utility subsidies implemented during the winter. As these subsidies are gradually phased out and oil prices are pushed higher by Middle East conflicts, inflation is likely to pick up again in the coming months.
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