Japan Base Pay Rises Most in 32 Years, Buoying Rate-Hike Outlook

Tokyo: So, guess what? Japanese workers just got a nice pay bump! Their base salaries jumped by 2.7% in November compared to last year. That’s the biggest rise in 32 years! It’s a good sign for the economy and might even lead to some interest rate hikes soon.

The labor ministry shared that nominal wages went up by 3%. Economists were expecting a 2.7% rise, so this is a pleasant surprise. Even better, full-time workers saw a 2.8% increase in wages, staying above 2% for 15 months straight.

But here’s the catch: real cash earnings dropped by 0.3%. That’s four months in a row of declines. Inflation is outpacing pay growth, especially after the government stopped utility bill subsidies, which pushed energy costs up.

Despite that, the steady wage growth might spark talks of a rate hike from the Bank of Japan. They’re meeting soon, and there’s a 46% chance of a hike in January. BOJ Governor Kazuo Ueda wants to see more data before making any big moves, especially about how sustainable this wage growth is.

Last year, the BOJ raised rates for the first time in 17 years, right after the biggest trade union, Rengo, announced significant wage increases. This year, Rengo is aiming for at least a 5% wage increase across the board, with a higher target for smaller companies.

Some companies, like Aeon Co. and Nippon Life Insurance, are already planning to raise salaries by at least 6%. With a tight labor market, businesses are feeling the pressure to keep wages up to attract and keep talent.

As we approach the BOJ’s January meeting, there are a few events that might shed light on wage trends. The bank will release its regional economic report soon, and Deputy Governor Ryozo Himino is set to speak to local business leaders next week.

Ueda hinted that we might see some momentum in wage negotiations even before Rengo’s official numbers come out in March. So, it’s an exciting time for workers in Japan!