Global Markets | Strong wage data in Japan fuels bets on more BOJ tightening

Japan’s real wages rose in January for the first time in more than a year as inflation cooled and base salaries posted their fastest growth in over three decades, strengthening the case for further monetary policy normalisation by the Bank of Japan, according to government data reported by Reuters.

Inflation-adjusted real wages, a key indicator of consumer purchasing power, increased 1.4% in January from a year earlier, reversing a 0.1% decline in December, according to official data released on Monday.

Average nominal wages, or total cash earnings, rose 3.0% year-on-year to 301,314 yen ($1,911), their fastest pace since July and an acceleration from December’s 2.4% growth.


The improvement in pay growth outpaced the consumer inflation rate used by the labour ministry to calculate real wages. That inflation gauge slowed to 1.7% in January, its weakest rise since March 2022, supported by fuel subsidies and fewer increases in food prices.

Regular pay, or base salary, climbed 3.0% from a year earlier, marking the biggest increase since October 1992 and a sharp pickup from a revised 2.1% rise in December. Overtime pay also strengthened, jumping 3.3% after a revised 1.5% gain in the previous month and reaching its highest level in around three years.

Special payments, which largely consist of one-off bonuses, rose 3.8% in January compared with a revised 2.7% increase in December.

The stronger wage momentum comes as the Bank of Japan prepares for its next policy review scheduled for March 18-19. The central bank raised interest rates to 0.75% in December, a level that remains low compared with most advanced economies.

Officials have indicated that future policy decisions will depend on whether wage gains broaden across the economy and provide households with sustained purchasing power.

Japan’s largest labour union group, the Japanese Trade Union Confederation (Rengo), recently said its member unions are seeking an average wage increase of 5.94% in this year’s annual wage negotiations, Reuters reported. The demand follows an average pay rise of 5.25% secured in 2025, the largest increase in 34 years, underscoring strong wage momentum in the country.