2025 Wage Increases Once Again Hold the Key to Japan’s Economy

At the New Year’s reception of three major economic organizations, Keidanren Chairman Masakazu Tokura stated during a press conference, “2025 will be a watershed year to determine whether Japan can fully break free from the deflationary mindset.” He emphasized the importance of establishing wage increases, while key corporate executives also stressed the necessity of raising wages by 5～6%.

Takeshi Niinami, chairman of the Japan Association of Corporate Executives, said “Now is a critical time to establish a mechanism to consistently increase real wages,　and small- and medium-sized companies hold the “key” to raising wages nationwide in the upcoming annual wage talks” and he expressed readiness to support these firms, which employ around 70 percent of Japan’s workforce, in passing rising costs onto their clients.

Kazuo Ueda, Governor of the Bank of Japan, addressed the New Year’s reception of the banking industry. Regarding monetary policy, he mentioned that if the improvement in economic and price conditions continues this year, the Bank would raise policy rates and adjust the degree of monetary easing accordingly. He pointed out that movements toward the spring labor-management negotiations would be a critical factor domestically and expressed optimism about wages and prices rising broadly and in a balanced manner.

Labour Force Survey Monthly Results*1

(1) Employment

The number of employed persons in November 2024 was 68.14 million, an increase of 340,000 over the same month the previous year. By gender, this included 37.04 million men, up 80,000, and 31.10 million women, up 270,000 over the previous year.

(2) Unemployment

The number of unemployed persons in November 2024 was 1.64 million, a decrease of 50,000 from the same month in the previous year.

The seasonally adjusted unemployment rate in November was 2.5%, unchanged from the previous month. The unemployment rate for men was 2.5%, down 0.3 points from the previous month, and for women 2.3%, up 0.3 point over the previous month.

(3) Job Availability

Japan’s job availability in November stood at 1.25, unchanged from the previous month. This ratio means there were 125 job openings for every 100 job seekers.

The ratio of regular employee job offers to applicants was 1.02, unchanged from the previous month.

The ratio of new job offers to applicants, a leading indicator for the labour market, was 2.25, up 0.01 points over the previous month. The number of new job-offers decreased 2.6% from the previous year. By industry, transport and postal activities increased 2.0% and wholesale and retail trade increased 0.9%, while accommodations, eating and drinking services and learning supports dropped 12.2% and 6.4%, respectively.

Industrial Production*2

Industrial output in November decreased 2.3% from the previous month, marking the first decline in three months, affected by slowing exports of semiconductor manufacturing devices and cars.

Production, shipment and inventories decreased, while inventory ratio increased. The industries that mainly contributed to this decrease were as follows: (1) production machinery; (2) motor vehicles; (3) fabricated metals, in that order.

According to the Survey of Production Forecasts in Manufacturing, production was expected to increase 2.1% in December and increase 1.3% in January.

Family Income and Expenditure Survey *3

(1) Expenditure of Households of Two Persons or More

Average monthly consumption expenditure of households of two or more persons in November was 295,518 yen, up 3.0% in nominal terms but down 0.4% in real terms from the previous year, falling for the fourth straight month, by consumers cutting outlays on food amid higher prices.

(2) Income and Expenditures for Workers’ Households

Average monthly income per household stood at 514,409 yen, up 4.1% in nominal terms and up 0.7% in real terms from the previous year. The average level of consumption expenditure was 316,535 yen per month, up 4.9% in nominal terms and up 1.5% in real terms year-on-year.

Consumer Prices *4

The consumer price index (CPI) in November was 109.5 (2020 = 100), up 2.9% over the previous year and up 0.4% over the previous month. Core inflation (CPI less food and energy) was up 2.4% over the previous year and up 0.2% over the previous month.

Prices for rice, Japan’s staple food, soared 64.7% over the previous year, the highest increase in nearly 49 years, due to short supply following last year’s hot summer. As government subsidies to alleviate the financial burden on households were reduced, energy prices in November climbed 6.0 %, up 2.3 points from October. The price of electricity soared 9.9 %, while that of city gas grew 6.4 %.

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1. Source: Labour Force Survey Monthly Results (Statistics Bureau of Japan)
   https://www.stat.go.jp/english/data/roudou/results/month/index.html
2. Source: Indices of Industrial Production (Ministry of Economy, Trade and Industry)
   https://www.meti.go.jp/english/statistics/tyo/iip/index.html
3. Source: Summary of the Latest Month on Family Income and Expenditure Survey (Statistics Bureau of Japan)
   https://www.stat.go.jp/english/data/kakei/156.html
4.  Source: Consumer Price Index (Statistics Bureau of Japan)
   https://www.stat.go.jp/english/data/cpi/1581-z.html