Real wages fall for the 24th month in a row in March; 2.5% decline attributed to higher consumer price index

Japan’s real wage index fell 2.5% in March from a year earlier, marking the 24th consecutive month of decline – the longest streak on record – according to preliminary data released Thursday by the Ministry of Health, Labor and Welfare .

Although overall nominal wages rose, inflation continued to outpace wage growth.

The decline in real wages, which takes into account the prices of goods and services, was attributed to the 3.1% increase in the consumer price index, which is used to calculate real wages. The second longest streak since records began in 1991 is the 23 consecutive months of annual decline from September 2007 to July 2009, a period that also included the collapse of US investment bank Lehman Brothers.

The fall in real wages in March was also larger than the 1.8% decline in February.

Nominal monthly wages per employee rose 0.6% on average to ¥301,193. Special rewards such as bonuses fell 9.4% to ¥21,959 year-on-year, making March’s growth rate smaller than February’s, for which a final report showed a 1.4% increase.

However, regular wages, such as basic salaries and overtime, rose 1.5% to an average of ¥279,234, apparently reflecting factors such as growing momentum for wage increases. Nominal wages exceeded the previous year’s figure for the 27th month in a row, which is also the longest streak on record.

During wage negotiations in the spring of this year, major companies responded with wage increases at the highest level in an average of 33 years. That has raised hopes for further wage increases from April, but there are no prospects for inflation to ease.

Moreover, if the yen’s depreciation leads to higher inflation due to rising import prices, some observers think it will be difficult for real wages to make a positive turnaround.