Japan’s 2022 wage increases fall short of inflation

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After adjusting for inflation, the real wages fell by 1.8%, the biggest drop in eight years.

Sustained high inflation has been eroding employees’ income, and Japan is a recent case.

According to data from the Ministry of Health, Labour and Welfare, Japan's inflation-adjusted real wages fell by 1.8% in the 2022 fiscal year that ended in March 2023, marking the biggest drop in eight years, i.e. since the 2014 fiscal year.

While nominal wages rose by 1.9%, the fastest pace in 31 years, Japan's real wages of employees in fact fell by 1.8% after adjusting for an inflation rate of 3.8% recorded over the same period.

To address the rising cost of living and to retain talent, major companies in Japan have agreed to raise wages by nearly 4% this year, the fastest in three decades, as reported by Nikkei Asia.

Meanwhile, citing a Finance Ministry survey by The Japan Times, 62.1% of companies in Japan have raised or plan to raise base pay in the 2023 fiscal year, with over one-third (37.3%) increasing it by 3% or more. The majority of businesses seek “to enhance the motivation of the employees, improve their labour conditions, and prevent them from leaving jobs" (80.4%), as well as “to respond to rises in commodity prices" (64%).

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