JAPAN’S inflation-adjusted real wages fell the most in eight years in the fiscal 2022 year, government data showed on Tuesday, as the rising cost of living overwhelmed workers’ nominal pay, government data showed on Tuesday.

The labour ministry data underscored the challenge for Prime Minister Fumio Kishida’s government to kick the world’s third largest economy into higher gear through a virtuous cycle of inflation and wage growth.

Nominal wages rose 1.9 per cent in the last fiscal year ended in March, the fastest increase in 31 years, but inflation at 3.8 per cent outpaced those pay gains, resulting in real wages falling 1.8 per cent in fiscal 2022, the data showed.

It was the biggest yearly decline since fiscal 2014 when the sales tax hikes stoked broader increases in prices and pushing real wages down by 2.9 per cent.

The data suggested that wages must rise even more to outpace inflation and help boost consumers’ purchasing power and private consumption that makes up more than half the economy.

Major firms have agreed to raise wages by nearly 4 per cent this year, the fastest gain in three decades, in a sign cautious Japanese firms see the need of improving pay to secure skilled workers in the face of a labour crunch in the fast-ageing population.

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In Japan, wages have barely grown over the past three “lost decades” since the burst of the asset-inflated bubble economy.

In comparison, other Group of Seven (G7) economies saw wages rising at a much stronger pace of around 1.4 times during the same period. REUTERS