Data released by the Japanese government on Friday showed that real wages increased by 1% year-on-year in March, marking the third consecutive month of growth. This trend provides further justification for the Bank of Japan to consider an interest rate hike at its next policy meeting in June.
The figures underscore the sustained momentum in Japanese wage growth, following the conclusion of this year's spring wage negotiations, which resulted in pay raises exceeding 5% for the third year in a row.
The Bank of Japan is scheduled to review its interest rate decision again on June 15-16. The central bank views steady increases in wages and prices as prerequisite conditions for implementing another rate hike. A recent survey indicated that nearly two-thirds of economists expect the BOJ to raise the benchmark interest rate to 1.0% by the end of June.
Real wages, which are adjusted for inflation and serve as a key indicator of household purchasing power, saw growth ease compared to the revised 2% increase recorded in February. However, the March figure remained higher than the 0.7% growth observed in January, which was the first month of positive real wage growth after 13 consecutive months of decline.
Nominal average wages, representing total cash earnings, rose 2.7% year-on-year in March to 317,254 yen (approximately $2,029.52). This follows a revised surge of 3.4% in February.
The consumer inflation rate used by the Ministry of Internal Affairs and Communications to calculate real wages stood at 1.6% in March. Nominal wage growth has now surpassed this inflation level. Furthermore, the inflation rate has remained below the Bank of Japan's 2% policy target for the third consecutive month. Japan's overall inflation level has been on a downward trend, influenced by government subsidies counteracting the effects of a weak yen pushing up import costs, as well as rising oil prices linked to geopolitical tensions involving Iran.
Base wages, which constitute fixed pay, increased by 3.2% year-on-year in March, showing a slight slowdown from the revised 3.4% growth in February. For full-time employees, base wage growth has now exceeded 3% for three months in a row.
Overtime pay saw a year-on-year increase of 1.9%. Conversely, special payments, which primarily include bonuses, decreased by 1.5% in March compared to the same period last year, following a revised significant increase of 7.5% in February.
