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Japan Faces Wage Decline Amid Inflation and U.S. Tariffs
TOKYO (Reuters) – Data from the labor ministry indicates that Japanese real wages have decreased for a second consecutive month in February, primarily due to rising inflation. This decline is troubling, especially as concerns mount over the repercussions of U.S. tariffs on Japan’s economy.
The recent implementation of sweeping tariffs by U.S. President Donald Trump has led to anxieties regarding a potential slowdown in the global economy, which could hinder Japan’s already fragile economic recovery.
In response to these challenges, Prime Minister Shigeru Ishiba announced on Thursday plans to introduce measures aimed at assisting domestic industries in navigating the impacts of the tariffs.
According to the labor ministry, inflation-adjusted real wages fell by 1.2% year-on-year in February, building on a revised 2.8% decrease recorded in January. This trend reflects a continuing erosion of purchasing power for consumers.
The consumer inflation rate that the ministry uses to assess real wages, which factors in fresh food prices but excludes rent, increased by 4.3% compared to the same period last year, showing only a slight decline from the 4.7% rise in January.
In an effort to alleviate the pressure on consumers resulting from broader economic distress linked to U.S. tariffs, Japan’s ruling coalition and the opposition Democratic Party for the People (DPP) reached an agreement on Friday to take measures to limit gasoline prices.
Despite the overall decline in real wages, regular pay—often viewed as base salary—experienced a modest increase of 1.6% in February, although this was slower than the 2.1% growth in January. Meanwhile, overtime pay, an indicator of corporate activity, saw a rise of 2.2%, up from a revised 1.5% increase the previous month.
The total average cash earnings, encompassing nominal pay, showcased an increase of 3.1%, reaching 289,562 yen (approximately $1,981) for the month. This rise in nominal pay was bolstered by significant gains in special payments, which mainly consist of one-off bonuses that surged by 77.4%.
Moreover, it has been reported that Japanese corporations have collectively agreed to implement an average pay hike of 5.4% this year, marking the most substantial increase in over three decades, according to Rengo, the nation’s largest labor union federation.
Typically, the outcomes of Japan’s annual spring wage negotiations start to be reflected in the wage data from April onward, highlighting the ongoing monitoring of economic and employment trends amid global uncertainties.
($1 = 146.1900 yen)
Source
finance.yahoo.com