Japan's real wages rise 2.2% in September, ninth straight monthly gain

The September data

The September reading accelerated from a revised 1.6% gain in August and beat the 1.3% consensus estimate.

Sustained wage pressure is expected to keep the BOJ raising its benchmark rate, The Straits Times reported. Consumer spending remains sluggish, according to Rengo's policy.

Nominal wages, which combine base pay, overtime and bonuses, reached 311,409 yen. Regular pay climbed 3.7% to 279,182 yen, with growth of at least 3% for nine consecutive months. The consumer price index used to calculate real wages rose 2.4%, so nominal gains outpaced prices.

The nine-month streak is the longest since a 12-month run between February 2016 and January 2017.

One caveat sits inside the release: the survey covers establishments with five or more employees.

Rengo sets a 6% target for 2027

Rengo, the Japanese Trade Union Confederation, said it would demand a wage hike of around 6%, with a minimum of 5%, in the 2027 shunto, the annual spring wage talks, Mainichi reported.

The union set a new midpoint target of 6% in its basic policy and urged member unions at small and medium-sized firms to aim for at least 6%, to narrow the pay gap with large companies. It put the target for non-regular workers such as contract and part-time employees at 7%. It also said it will seek a minimum hourly wage of at least 1,350 yen, up 50 yen from its 2026 target.

Rengo has secured increases of 5% or more for three consecutive years through the 2026 talks, and its president, Tomoko Yoshino, said a higher target of around 6% would be "one of the key strategies, if we aim for 5 percent or more (pay rise)". Its policy paper said that "only a small number of people feel their standard of living has improved".

The employers' side

Keidanren, the Japan Business Federation, is expected to keep base-pay increases as the standard for shunto negotiations in draft guidelines for the 2027 talks, Jiji Press reported via The Japan News in early September.

The draft, from its Committee on Management and Labour Policy, is expected to stress spreading wage momentum to smaller companies through appropriate business transactions. It is also expected to call for wage hikes framed as investment in people, and to urge employers to speed up work style reforms built on the use of artificial intelligence as labour shortages become more acute.

Not everyone expects the union's number to be met. Yasunari Tanaka, a researcher at Mitsubishi Research Institute, said he expects wage increases in next year's negotiations to come in at around 5%, roughly the same pace as in 2026, The Straits Times reported.

Why the BOJ is watching

More than 80% of economists surveyed by Bloomberg expect the BOJ to raise borrowing costs at its next policy meeting on 18 December.

The median forecast puts the terminal rate for the current cycle at 1.75%, implying two more quarter-point increases, while BNP Paribas and J.P. Morgan Securities are among those forecasting 2.5%. Bloomberg economist Taro Kimura said his baseline has three more 25-basis-point hikes, in December, March and July, taking the policy rate to 2%.

BOJ governor Kazuo Ueda said after the bank left rates unchanged at its previous meeting that underlying inflation had reached a level broadly consistent with its 2% target. He stressed the importance of labour and management factoring 2% inflation into pay negotiations. The central bank has previously cited early momentum in wage talks as a factor supporting rate increases.

What happens next

The 2027 shunto negotiations culminate in March. The labour ministry has signaled it will keep a close watch on whether the wage growth cycle continues, alongside price trends.