Japan’s real wages unlikely to rise much in 2026ーNHK WORLD-JAPAN NEWS
In business, we’ll be taking a look at what to expect as we head into the coming year 2026. And Yuko Fushima joins us now to give us an idea of uh where wages in Japan are headed. A concern for many who’ve been uh struggling to make ends meet, right, Yuko? Yes. The government just announced on Friday that households spent an average of 3% less in October compared to the same month last year. Officials say consumers are especially cutting back on food purchases as prices have soared. Part of this can be blamed on wages not keeping pace with inflation. Now, this chart shows the latest trend in real wages. That’s take home pay after accounting for rising prices of goods and services. As you can see, real wages have actually been sliding backward throughout the year. So, why aren’t wages keeping pace? Economist Kumano Hidel says to understand that it is worth comparing with the United States. He says in the US real wages have been growing growing a stark contrast with Japan. The pay of US workers relative to prices has been going up for several years now. Kumano says the key difference is what is happening in the services sector. In the United States the prices of goods are relatively low. On the other hand the prices of services are high. That means higher wages in the services sector, which is why real wages have been increasing. But in Japan, the situation is the opposite. Price for services have been rising slowly while those of goods have been climbing fast. That causes real wages to lag behind. Kumano says the reason both service prices and wages in the US are so high is because of the companies offering high value added services. The creation of high value added services is quite large relative to labor input. This is the key difference. Unfortunately, there is no tech industry in Japan anything like the one in the US, led by the so-called Magnificent 7, including Amazon and Microsoft. Wages are driven up by firms with high productivity. But that’s not the case in Japan. I should say it’s totally the opposite. There are no industries to drive wages higher, and industries such as medicine, social services, and nursing offer pay that is very low. Kumano adds that even if medical firms in Japan want to offer highquality services at higher prices, they cannot. That’s because government sets the prices in many medical fields. Looking to next year, Kimono points to two challenges to getting paychecks growing at a healthy clip. One is a tariffs imposed by the Trump administration. Just looking at the auto industry, based on the earnings reports of seven major car makers, they will be paying 3 trillion yen or about $19 billion to the US for tariffs annually. These funds should have been used to increase pay. The other thing that could make it harder to raise pay is the political route between Japan and China. Tourists from mainland China and Hong Kong make up about onethird of inbound tourism demand. That’s also about $19 billion. So income in the tourism industry could decline with an impact on wages. Kumano expect Japan’s inflation rate to come down to around 2% next year and overall nominal wage growth to also be 2%. So real wage gains will likely be around zero. Kimono says to get things moving, small and mediumsiz companies need to venture beyond Japan. The Japanese currency is horribly weak right now. That means Japanese firms are competitive against others in exporting to the US and Europe. Increasing exports is ultimately a way to grow wages. Major companies are turning big profits through exports and 85% of exporters are major companies. But their domestic suppliers hardly export anything. That’s even truer further down the supply chain. if they can export, the value added by small and medium-sized companies goes up. So, it seems to really see some meaningful wage gains in Japan. Companies may need to rethink their business models and it could take some time for fatter paychecks to start rolling in well beyond the coming
Japan’s real wages have been falling, and prospects do not look much better in 2026, as the country struggles with a weak services sector and US tariffs. #business
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