Base pay growth remains in the 3% range for the eighth consecutive month; real wages stay positive, supporting BOJ normalization

According to the Monthly Labour Survey (preliminary data) released by the Ministry of Health, Labour and Welfare on the 7th, scheduled earnings, equivalent to base pay, increased 3.8% year on year. This was the first time since October 1992 that the increase had been at least 3% for 8 consecutive months, while total cash earnings, another measure of nominal wages, also rose 3.8%, exceeding market expectations.

Real wages, based on the CPI excluding imputed rent for owner-occupied housing, rose 1.5%, marking an eighth consecutive month of increases. On an all-items CPI basis, they rose 1.9%, marking a ninth consecutive month of increases. The Ministry of Health, Labour and Welfare pointed to steady growth in scheduled earnings and a recovery in real wages.

At its September Monetary Policy Meeting, the Bank of Japan raised its policy rate to around 1.25%. Against a backdrop of solid wage growth, it plans to maintain its rate-hike path while adjusting the degree of monetary accommodation, making the latest wage data a potential factor in the normalization of monetary policy.

Ryosuke Katagi (片木亮介), a market economist at Mizuho Securities, said the results remained solid, reflecting the spring wage negotiations, and analyzed wages as following the path anticipated by the Bank of Japan. He said the next rate hike was likely to come in January next year, although a December move could not be ruled out.

Prime Minister Sanae Takaichi (高市早苗) has emphasized the continuation of wage increases that outpace rising prices, explaining that wage trends have stabilized partly as a result of government measures. The average wage increase in this year's spring negotiations met Rengo's target for the 3rd consecutive year, and efforts to raise the minimum wage for fiscal 2026 are also progressing.