Japan Nominal Wage Growth Below Estimates

Japan’s nominal wages rose 2.4% year-on-year in December 2025, up from a revised 1.7% gain in November but below market expectations of 3% growth. Wage growth picked up slightly at the end of the year following a sharp slowdown caused by lower one-off bonuses. Base pay accelerated to 2.2% in December from 1.9% in November, while special payments rose 2.6% compared with 1.5% the previous month. Meanwhile, inflation-adjusted real wages, a key gauge of household purchasing power, fell 0.1% in December from a year ago, marking the 12th consecutive month of contraction as nominal pay growth lagged slightly behind consumer inflation. The reading offered little guidance on the Bank of Japan’s policy outlook, as officials have indicated that further monetary tightening will depend on sustained, broad-based wage gains.

Japan’s nominal wages rose just 0.5% YoY in November 2025, a sharp slowdown from October’s 2.5% increase and well below market expectations of 2.3%. The reading marked the weakest pace of wage growth in nearly four years, largely driven by a steep 17% yearly drop in one-off bonus payments. Such bonuses are typically volatile outside peak payout periods, and government officials cautioned that November data often understates actual earnings at the preliminary stage, as many winter bonuses have yet to be recorded. Meanwhile, inflation-adjusted real wages, a key measure of household purchasing power, declined 2.8% from a year earlier, the steepest contraction since January. Consumer prices rose 3.3% in November, significantly outpacing wage growth and continuing to erode real incomes. The widening gap between wages and inflation complicates the Bank of Japan’s policy outlook, as policymakers have signaled further monetary tightening would depend on sustained and broad-based wage gains.

Japan’s nominal wages rose 2.6% year-on-year in October 2025, the strongest increase in three months and above market expectations of 2.2%. However, wage growth continued to lag behind price increases for the tenth straight month as inflation kept outpacing pay gains. Real wages, a key gauge of household purchasing power, fell 0.7% in October from a year earlier as living costs climbed 3.4%, eroding workers’ disposable income. Base salaries and overtime posted modest increases, while special bonuses jumped 6.7%, though such payments tend to be seasonal and less reliable as a sustained income boost. The data adds pressure on the Bank of Japan ahead of its December policy meeting, with speculation building that policymakers may opt for another rate hike.