Japan May real wages post biggest drop in nearly 2 years on inflation

Japan’s real wages extended a decline in May to post the biggest year-on-year drop in nearly two years, government data showed on Tuesday, as consumer inflation hovering near a seven-year-high outpaced nominal wage growth, reducing households’ spending power.

Higher living costs amid low-wage growth are likely to curb Japan’s consumption-led economic recovery from the coronavirus pandemic.

Inflation is also a top issue for voters in an upper house election on Sunday, although Prime Minister Fumio Kishida’s ruling party likely to increase the number of seats it holds, according to an opinion poll published on Monday.

In May, inflation-adjusted real wages, a key gauge of consumers’ purchasing power, fell 1.8per cent from a year earlier, the labour ministry said.

The biggest slump since July 2020 followed a downwardly revised 1.7per cent decline in April.

The consumer price index the ministry uses to calculate real wages, which includes fresh food items but excludes owners’ equivalent rent, rose 2.9per cent in May, hovering near 3.0per cent in April that posted the largest jump since October 2014.

Price inflation outpaced nominal total cash earnings, which rose 1.0per cent in May, down from a downwardly revised 1.3per cent rise the previous month, the data showed.