News On Japan

Will Pay Rises in Japan Finally Outpace Inflation This Year?

TOKYO - Japan’s wages have risen by more than 5% for two consecutive years in 2024 and 2025, and this year’s annual spring wage negotiations are set to begin in late January, raising fresh questions over whether pay growth can finally catch up with inflation and what steps are needed to restore household purchasing power.

Consumers say they still feel the pressure of higher prices, particularly for food, with many cutting back where they can and switching between supermarkets to find cheaper vegetables, meat, and daily necessities. Some retailers are stepping up discount campaigns to help shoppers cope, including one supermarket that has introduced unannounced weekday flash sales branded as “guerrilla services,” offering steep markdowns by buying products in bulk and, in some cases, selling items for less than half the usual price.

Store managers say they are seeing clear changes in customer behavior, with more shoppers abandoning their usual preferred brands and choosing cheaper alternatives as prices rise. Analysts at Nowcast, a company that tracks inflation and consumer trends using point-of-sale data and credit card spending, say consumers are increasingly turning away from brands that raise prices. In one example, sales of a leading mayonnaise brand fell sharply after a price hike in September, while a rival company that held off on raising prices gained market share, a shift that continued through December and suggests that cost-conscious habits are becoming more entrenched.

Despite nominal wage growth, real wages—adjusted for inflation—have remained negative for 11 consecutive months, underscoring why many households feel they are falling behind. However, expectations are growing that this situation could improve if this year’s wage negotiations produce stronger results.

Keidanren, Japan’s main business lobby, released its management policy guidelines around January 20th, stating that society is demanding wage growth that exceeds inflation and positioning base pay increases as the standard starting point for negotiations. Rengo, the country’s largest labor union federation with about 7 million members, has set a target of wage increases of at least 5% this year, centered on base pay hikes, with the goal of putting real wages on track to rise by 1%.

Still, inflation remains a major obstacle. Japan’s overall consumer prices excluding fresh food rose 3.1% over the past year, and some commentators argue that even a 5% wage hike may not be enough to restore a sense of improving living standards. They say companies that can afford it should aim higher, while wage talks should also help narrow disparities and reduce the sense of inequality.

Economists point to signs that inflation is becoming more deeply rooted across both households and companies, with a growing share experiencing inflation above the Bank of Japan’s 2% target. Surveys also suggest that inflation expectations remain high, with many people believing prices will continue rising by several percent in the years ahead.

At the same time, surveys show Japanese workers are unusually pessimistic about their future real wages compared with people in the United States and Europe, with a large majority expecting their purchasing power to decline. Experts warn that such pessimism can weaken consumer spending, making households hesitant to make major purchases or invest more in education, and could prevent Japan from achieving a virtuous cycle of rising wages and prices.

Some researchers have urged labor unions to rethink how wage demands are set, including basing negotiations on future inflation forecasts rather than past inflation, introducing a “catch-up” mechanism to compensate for years of real wage losses, and reflecting labor shortages more clearly in wage demands using measurable data. One economist suggested that wage hikes closer to 6% may be needed, particularly at large firms, to begin reversing years of declining real wages and prevent gaps between big companies and small businesses from widening further.

With inflation already reshaping consumer behavior and corporate pricing strategies, the outcome of this year’s spring wage talks is likely to be a critical test of whether Japan can finally deliver sustained real wage growth and restore confidence that living standards will improve.

Source: TBS

News On Japan
POPULAR NEWS

Large Typhoon No. 25 was moving northwest over waters south of Japan at 3 p.m. on September 19 and is forecast to strengthen as it approaches Kanto and the Izu Islands from September 20 through September 21, bringing the risk of torrential rain, violent winds and further damage in areas still recovering from last year's typhoon.

A black bear has been spotted near one of the most popular hiking trails on Mount Takao in western Tokyo, prompting authorities to urge visitors to take precautions ahead of the five-day Silver Week holiday and the approaching autumn foliage season.

Starbucks is considering selling a majority stake in its Japanese business, potentially valued at as much as $3 billion, or about 470 billion yen, as the U.S. coffee chain seeks to concentrate management resources on its struggling North American operations.

Japan's Halloween Jumbo Lottery went on sale nationwide on September 16, offering a combined top payout of 400 million yen for the first prize and its adjacent-number prizes.

A new top-tier "Supreme Class" offering fully private compartments above the level of Green Car service will debut on the Tokaido and Sanyo Shinkansen on October 1, with passengers able to experience the new seating at a demonstration booth at Shin-Osaka Station.

MEDIA CHANNELS
         

MORE Business NEWS

The yen strengthened by more than 1 yen against the dollar in a short period late on September 18 after the Bank of Japan conducted a rate check, a step commonly taken in preparation for possible intervention in the foreign exchange market.

Tokyo stocks rose sharply on September 18, with the Nikkei 225 climbing to around 65,350 in afternoon trading after the Bank of Japan raised interest rates to 1.25%, as the yen weakened and investors bought artificial intelligence and semiconductor-related shares.

The Bank of Japan raised its policy interest rate from 1.0% to 1.25% on September 18, lifting borrowing costs to their highest level in 31 years as policymakers moved to contain growing inflation risks, but the yen weakened sharply after the decision as markets focused on two dissenting votes and uncertainty over the pace of further increases.

A market spread is generally the difference between two market prices. Most commonly, traders use the term to describe the bid-ask spread: the difference between the highest price a buyer is currently prepared to pay and the lowest price a seller is prepared to accept.

Tokyo stocks rose on September 17, with the Nikkei 225 closing at 64,136, up 213.25 points, as investors bought selected technology, pharmaceutical, insurance and consumer-related shares after the Federal Reserve’s rate hike, though gains were capped by a stronger dollar, renewed yen weakness and caution before the Bank of Japan’s policy decision.

Hakone, one of the Kanto region's most popular tourist destinations, has been left with just two operating gas stations after a series of closures, prompting the town to provide more than 10 million yen in subsidies to help reopen a shuttered facility.

Japan's Halloween Jumbo Lottery went on sale nationwide on September 16, offering a combined top payout of 400 million yen for the first prize and its adjacent-number prizes.

Japan's National Tax Agency is preparing a major overhaul of the way unlisted shares are valued for inheritance tax, a reform that could significantly affect business succession at profitable, asset-rich companies and would mark the first fundamental revision of the rules since they were introduced in 1964.