Real Wage Turns to a Plus

Ministry of Health, Labor and Welfare released Monthly Labor Survey for June 2024, which indicated that real wage of workers in Japan turned to a plus for the first time in these twenty-seven months. Total cash earnings in real wage in June 2024 marked 143.0, compared to the average in 2020 as 100, marking 1.1 percent of surplus from the same period of previous year. For some disappointments, the surplus is recognized as a temporary phenomenon caused by change of salary system.

Prime Minister Fumio Kishida has been making effort to achieve positive cycle of consumption price and wage and urging business sectors to raise workers’ wage as much as possible. Although the wage marked 5 percent of increase in the spring labor negotiation this year, price inflation caused by unstable security situation in Ukraine or Palestine or depreciation of Japanese yen offset the increase of wage.

 

However, total cash earnings in June 2024 marked 4.5 percent of increase, to 498,884 yen, which was the greatest increase since January 1997. The increase of total cash earnings was maintained for thirty consecutive months. Although consumer price index in June increased by 3.3 percent, nominal wage overtook it with increase of 4.5 percent. The increase of real wage in June 2024 terminated the trend that wage hike could not catch up with price hike.

 

Prime Minister Kishida stressed correctness of his economic policy. “Japanese economy maintains strong steps toward a new stage,” said Kishida.

 

One of the reasons of wage hike, however, was drastic increase of “special cash earnings.” The salary for workers in Japan is divided into two ways, monthly-paid salary and bonus ordinarily provided twice a year in summer and winter. The survey indicated that while contractual cash earnings, or monthly-paid salary, marked 2.3 percent of increase from the same period of previous year, special cash earnings of bonus rose up by 7.6 percent.

 

It is analyzed that the increase was mainly brought by temporary cash earnings, because a number of companies changed the month of providing their employees bonus from July to June this year. The real wage based on contractual cash earnings in June 2024 was declined by 1.0 percent. It is highly likely that real wage will decline again into the negative in July.

 

The concern of economic experts is whether real wage is going to increase stably. There is a speculation that real wage will constantly grow after this fall, when the effect of wage hike this spring will appear. On the other hand, there are some concerns for the future of Japanese economy. The shift of monetary policy by Bank of Japan, which caused appreciation of Japanese yen, may have negative impact on some exporting businesses. If the profit of major corporation shrinks, it will affect overall businesses in Japan, posing downward pressure on wages.

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