FX.co ★ Japan Nominal Wage Growth Slows Sharply in May

In May 2025, nominal wages in Japan increased by only 1% compared to the previous year, marking the third consecutive month of slowdown and falling significantly short of the market's anticipated 2.4% rise. This uptick represents the slowest growth since March 2024, largely impacted by an 18.7% decrease in special (bonus) payments. Concurrently, real wages—adjusted for inflation and a critical indicator of consumer purchasing power—dropped by 2.9%, continuing their decline for the fifth month in a row and registering the steepest decrease in almost two years. Despite record pay hikes agreed upon during this year’s spring labor negotiations, wage data broadly has not yet benefited, as smaller, non-unionized companies are slower to implement these increases. This sluggish wage growth heightens concerns about Japan's economic prospects, especially amid increased global instability spurred by recent US tariffs. Moreover, it poses challenges for the Bank of Japan's efforts toward policy normalization, as stagnant real incomes are likely to curtail consumer spending and halt broader economic advancement.