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Japan Grapples with Record Wage Decline Amidst Inflationary Pressure & Currencies

Japan, the third largest economy in the world, is facing an unprecedented drop in salaries and wages. On Friday, the Ministry of Health, Labor and Welfare published data revealing the worst real wage decline since May 2014, with a 3.8% year-on-year decrease in inflation-adjusted wages.

Japanese Prime Minister Fumio Kishida is working to prevent the country from falling into a period of stagflation. Stagflation is a phenomenon of simultaneously high inflation and stagnant economic growth, which ultimately reduces people’s purchasing power. Kishida called upon businesses to raise wages above the rate of inflation, to ensure the continued vitality of the economy.

The goal of the Prime Minister’s administration is to raise wages by at least 3% annually. However, according to the Organisation for Economic Co-operation and Development (OECD), wages in Japan have remained largely static over the past decade. In comparison, many other countries have seen their average wages increase during the same period.

Rising prices of commodities, combined with a weak Japanese Yen, has led to higher costs for businesses. Many of these cost increases are being passed on to consumers at a rate not seen since December 1981, according to a report released by the Daiwa Institute of Research.

The Japanese Trade Union Confederation, known locally as Rengo, is now advocating for a 5% wage increase during upcoming talks with corporate management teams. Kishida pointed out that profits for businesses have grown exponentially in the past 30 years, but wages have not kept up with this growth.

In response to the inflationary pressures, a number of restaurants have had to alter their menus and incorporate more cost-effective items. Items such as fried chicken and rice pizzas**, which feature cheaper ingredients than the classic Italian pie, can now be found on the menu.

Overall, Japan is facing a difficult economic situation, as wages fail to keep up with inflation and costs spiral ever higher. Prime Minister Kishida is doing his best to pressure businesses to raise wages, and to help mitigate the financial losses for the country’s citizens. .