Japan wages data, May 2025

• real wages dropped 2.9% year-on-year in May, the sharpest fall in nearly two years, the fifth consecutive monthly decline in inflation-adjusted wages
• nominal wages rose 1.0% (expected +2.4%, prior +2.0%), the slowest pace since March 2024, the decline was largely due to an 18.7% drop in special (bonus) payments
• regular base pay and overtime earnings also slowed

The broader wage data has yet to reflect record pay gains agreed during this year’s spring labour negotiations. Many smaller firms—without unions—are slower to implement hikes.

Despite a surge in household spending in May (May household spending +4.7% y/y (expected +1.2%, prior -0.1%), concerns persist that upcoming U.S. tariffs on Japanese exports could dent corporate profits and hinder future wage growth, complicating the Bank of Japan’s path to normalising interest rates.

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