Japan Average Cash Earnings YoY

Nominal wages in Japan rose by 3% year-on-year in November 2024, marking an acceleration from the 2.6% increase seen in October and surpassing market forecasts of 2.7%. However, real wages—adjusted for inflation and a key indicator of consumers' purchasing power—fell by 0.3% year-on-year in November. This follows a 0.4% decline in October and represents the fourth consecutive month of negative real wage growth, despite base pay rising at its fastest pace in over three decades. These figures complicate the outlook for the Bank of Japan's monetary policy, as the central bank has stressed that broad-based wage increases are essential to justify raising borrowing costs. Looking ahead, Japanese companies are expected to raise wages by approximately 5% in 2025, matching the increases seen in the previous year.

Nominal wages in Japan rose by 2.6% year-on-year in October 2024, marking the slowest growth since May, in line with market expectations. In contrast, inflation-adjusted real wages—an important measure of consumers' purchasing power—remained flat compared to October 2023. This was an improvement from the 0.4% decline in September and a 0.8% drop in August. The stability in real wages bolsters expectations for an interest rate hike by the Bank of Japan this month, although market sentiment remains split on whether the next increase will come in December or January. BOJ Governor Kazuo Ueda indicated last week that a rate hike is imminent, as the economy is progressing according to forecasts. However, BOJ board member Toyoaki Nakamura suggested on Thursday that he may oppose a rate hike in December. Additionally, overtime pay—a key indicator of corporate health—rebounded in October, growing by 1.4% after a 0.9% decline in the previous month.

Nominal wages in Japan increased by 2.8% year-on-year in September 2024, maintaining the same pace as in August and aligning with market expectations. However, real wages slipped 0.1% in September, as consumer inflation accelerated to 2.9%, outpacing the growth in nominal wages. Real wages had turned positive in June and July, largely due to the seasonal summer bonus period. The latest wage data adds complexity to the Bank of Japan's outlook for future interest rate hikes. Despite this, BOJ Governor Kazuo Ueda emphasized last week that wage and price trends remain in line with the central bank's forecasts, suggesting conditions are aligning for a potential increase in borrowing costs. In another key indicator, overtime pay—a gauge of corporate health—dipped by 0.4% in September.