Japan wage growth -Renewed Pressure

Japan’s wage growth slowed sharply in August, signaling renewed pressure on the Bank of Japan (BOJ) as it assesses the sustainability of wage-led inflation. The slowdown in pay growth could complicate policymakers’ plans to exit ultra-loose monetary settings.

According to government data released on Tuesday, average cash earnings dropped to 1.5% in August, down from 3.4% a year earlier. Real wages adjusted for inflation fell for the eighth consecutive month, underscoring the persistent weakness in household purchasing power.

Prime Minister Fumio Kishida faces growing pressure to deliver measures that address cost-of-living challenges as inflation continues to erode real income. The data arrives as Kishida’s administration prepares a supplementary budget to counter rising prices and support low-income households.

The soft wage data have prompted economists to temper expectations for a near-term BOJ rate hike. Analysts now see the central bank maintaining its cautious stance until at least late October or early November, as policymakers await more evidence of stable, wage-driven inflation.

The Japanese yen weakened modestly after the data, trading around 149.30 per dollar as traders reassessed the likelihood of BOJ policy tightening. Government bond yields slipped slightly, reflecting softer inflation sentiment.

Disclaimer: Data reflects the latest update from Japan’s Ministry of Health, Labour and Welfare as of October 8, 2025.