Tokyo: Japan’s real wages experienced a significant decline of 2.9 percent in May compared to the previous year, marking the fifth consecutive monthly decrease and the steepest drop in almost two years. This downturn is primarily due to the persistent inflation that continues to outpace pay growth, according to recent government data.

According to Lao News Agency, the decline in real wages, which serve as an indicator of consumer purchasing power, accelerated from a revised 2.0 percent decrease in April. This represents the most substantial drop since September 2023, largely attributed to reduced bonuses, as reported by the Ministry of Health, Labor and Welfare.

Nominal wages, which include base and overtime pay, saw a growth of 1.0 percent, reaching 300,141 yen, or approximately $2,000. This marks the 41st consecutive month of nominal wage increase. Japanese companies committed to a wage increase averaging 5.25 percent during this year’s spring pay negotiations, marking the second consecutive year of wage increases exceeding 5 percent, as noted by the country’s largest trade union confederation.

However, consumer prices rose by 4.0 percent in May, primarily due to increased costs of rice and other food items, keeping real wages, which account for inflation, in negative territory. Average wages for the month were further impacted by a decrease in special earnings, such as bonuses and transportation allowances, which fell by 18.7 percent to 12,595 yen.

A ministry official pointed out that the drop in special earnings was due to fewer workplaces distributing bonuses in May. While there is an expectation of increased special earnings as companies pay bonuses in June, it remains uncertain if this will lead to an expansion in real wages. Last year, inflation-adjusted wages saw year-on-year increases in June, July, November, and December, coinciding with bonus payments by many companies.