Japan’s Real Wages Rise 2.2% in September for Ninth Straight Month
Key Facts
Japan’s real wages rose 2.2% year on year in September, marking the ninth consecutive month of gains, according to data reported by Reuters via MarketScreener. Growth accelerated from 1.6% in August after revision, extending the improvement in wages after inflation. The reading matters as the Bank of Japan assesses the path of monetary policy, since higher wages support household incomes in the face of rising prices. A labor ministry official said the steady rise in base wages this year had contributed to the improvement in real wages. However, income components point to a divergence between regular wage growth and a jump in special payments.
Average nominal wages, or total cash earnings, rose 4.6% to 311,409 yen in September, compared with revised growth of 3.9% in August. That was the fastest increase since January 1997, Reuters reported, while a Reuters report on Investing.com said the figure exceeded expectations for cash earnings growth of 3.8%. The overall figure reflects higher base wages alongside a sharp increase in special payments. But acceleration in the total does not mean every wage component grew at the same pace. Regular wages rose more moderately than total cash earnings.
Base, or regular, wages rose 3.7% year on year in September, after increasing 3.8% in August, remaining close to the previous month’s pace. A labor ministry official said the steady rise in these wages during the year had contributed to the improvement in real wages. By contrast, overtime pay growth slowed to 3.6% from a revised 4.9% in August. The figures show that wage components linked to regular and overtime work did not keep pace with the sharp increase in total cash earnings. This underscores the importance of looking at wage components alongside the overall measure when assessing income momentum.
Special payments, which are mostly made up of one-time bonuses, were the main driver of the monthly jump, rising 32.6% in September after a revised 1.8% increase in August. The labor ministry said the sharp increase reflected a statistical factor and did not represent a comparable actual rise in bonuses or other payments. That explanation limits the reading of the jump as standalone evidence of a recurring acceleration in wages. By contrast, regular wage growth presented a more moderate picture, while the pace of overtime pay fell. The net result was an increase in average cash earnings, with a clear difference in the sources of the rise.
The inflation measure the ministry uses to calculate real wages rose to 2.4% in September from 2.2% in August, but remained below its 3.4% level a year earlier. The rise in this measure coincided with higher nominal wages, while real wages posted annual gains for the ninth consecutive month. In minutes of its September meeting, the Bank of Japan said labor market conditions remained tight and nominal wages per person continued to rise steadily, though they fluctuated. The bank raised its benchmark interest rate in September to 1.25% from 1.0%, its highest level in 31 years. The governor said the bank would continue to monitor wage growth as it assesses its next steps.
Reuters said the wage data strengthen the case for the Bank of Japan to continue raising interest rates, but do not settle the timing of its next move. The agency reported that many analysts expect another hike as soon as next month. This follows the September decision to raise rates to 1.25%, while the Nikkei 225 rose 1.4% after the announcement, according to the Associated Press. September’s reading extends the run of real wage gains, after July recorded annual growth of 2.4%, its largest increase since May 2021, and the seventh consecutive month of gains at the time. The monetary policy path remains tied to the bank’s assessment of wage and price developments in upcoming readings.