Japan's real wages dropped 2.5 percent in 2023 for the second straight year of decline, as salary increases failed to keep up with inflation, while household spending fell for the first time in three years, government data showed Tuesday.
The decrease in real wages, the sharpest since a 2.8 percent decline in 2014 when the country's consumption tax was raised to 8 percent from 5 percent, came despite repeated calls by Prime Minister Fumio Kishida for wage hikes that beat soaring prices.
Nominal wages, or the average total cash earnings per worker including base and overtime pay, grew 1.2 percent to 329,859 yen ($2,200) a month, the third consecutive annual increase, the Ministry of Health, Labor and Welfare said in a preliminary report.
The continued drop in real wages came even after major Japanese companies raised wages by 3.99 percent on average last year, the biggest increase in 31 years, indicating the move has not spread to smaller enterprises, which hire nearly 70 percent of workers.
The country's most powerful business lobby is urging its member companies to offer higher pay increases than last year at annual wage negotiations.
"Real wages need to rise in order to enrich people's lives through a favorable economic cycle," labor minister Keizo Takemi said. "We will strive to create momentum so that wage increases spread to regional areas, and smaller and medium-sized businesses."
In December alone, real wages fell 1.9 percent from a year earlier for the 21st consecutive month of decline.
Separate data showed the country's average household spending in 2023 dropped a real 2.6 percent from the previous year, as people cut spending on education, food and household goods on the back of rising prices.
Households of two or more people spent an average of 293,997 yen per month last year, the Ministry of Internal Affairs and Communications said.
Educational expenses plunged 9.8 percent, as households switched children from cram schools to comparatively affordable online courses, a ministry official said.
Spending on food, which accounts for about 30 percent of household expenditures, was down 2.2 percent, while spending on household goods fell 7.4 percent.
Spending on medical supplies dropped 2.4 percent, as demand for face masks declined after the legal status of COVID-19 was downgraded to the same category as seasonal flu last year.
Meanwhile, outlays on entertainment expanded 3.4 percent, as more people went out following the removal of coronavirus restrictions.
In December, household spending fell 2.5 percent from a year earlier, declining for the 10th consecutive month.
The data is a key indicator of private consumption, which accounts for more than half of the country's gross domestic product.
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