Japan real wages slide sharply in November, posing a key dilemma for the Bank of Japan

Japan's real wages experienced a significant decline of 2.8% year-on-year in November, the sharpest drop since January. This decline underscores the ongoing pressures on household purchasing power as inflation continues to outpace income growth. The significant drop in special payments, particularly one-off bonuses, was a key contributor, falling by 17% compared to the previous year. With consumer prices rising 3.3%, the gap between wage growth and inflation presents a serious challenge to policymakers. The Bank of Japan recently raised its policy rate to a 30-year high of 0.75% and indicated possible further tightening if wage momentum increases. The coming spring wage negotiations will be critical as Japan's largest union seeks 5% pay hikes, posing broader implications for inflation sustainability alongside real income growth.