Japan’s largest union group, Rengo, reports an average wage increase of 5.40% based on second-round data, revised slightly down from 5.46%. Typically, later revisions tend to lower reported wage hikes.
In 2024, first-round data showed a 5.28% increase, which was revised down to 5.10%. This marks the second consecutive year in which the average wage hike has surpassed 5%, which is beneficial for the Bank of Japan.
Wage Growth Trends
This latest update provides a clearer picture of wage trends in Japan. The downward revision from 5.46% to 5.40% follows a familiar pattern, as initial estimates often decline when more data becomes available. This was evident last year when the first-round figure of 5.28% later settled at 5.10%. That said, even after adjustments, wage growth remains above 5% for a second year. This is an important consideration for policymakers at the Bank of Japan, as sustained wage growth supports their stance on monetary policy.
For those watching central bank decisions closely, this data reinforces expectations that stronger wage growth could lead to greater confidence in achieving stable inflation. Inflation alone is not enough—higher wages are needed to prevent households from scaling back spending. This aligns with what Governor Ueda and his colleagues have emphasised. Without rising incomes, inflation risks being short-lived, driven only by external factors rather than sustainable domestic demand.
Monetary authorities will likely take this into account over the coming weeks, particularly when assessing whether conditions support a policy shift. If wages continue rising at a steady pace, we may see policymakers more willing to adjust their current stance. However, past revisions suggest some caution is warranted. The trend is positive, yet final figures may still come in lower. Observers should wait for additional confirmation before assuming wage growth will remain at these levels.
Impact On Smaller Firms
Another aspect to consider is how companies respond in the months ahead. Rengo, which represents many of the country’s largest unions, has successfully secured higher wages, but smaller firms could struggle to match these increases. If wage growth remains concentrated among larger corporations, the overall impact on consumption may be uneven. Policymakers will be watching for signs that a broader wage recovery is taking hold.
For traders focusing on rate expectations, this presents an ongoing question: How confident will the central bank be that rising wages will translate into lasting inflation? Any indication from Tokyo that policymakers are prepared to act sooner rather than later could shift market assumptions. However, given the historical pattern of downward revisions, taking a measured approach may be preferable until final figures provide greater clarity.
