The Japanese government may establish a 1% increase in real wages, as its first official compensation target ever, a move that extends inflation and a move that extends domestic demand.
According to a draft policy by Prime Minister Shigeru Ishiba, the government will set a goal of 1% real wage gains starting from April 2029. The goal is based on the premise of stable and sustainable 2% inflation.
Although the government has long urged the private sector to cancel compensation, this will be its first official numerical target.
As Japanese households continue to compete with stagnant real income growth, even after the biggest increase in nominal wages in recent decades. Consumer inflation has remained at or above the Bank of Japan’s 2% target or over three years, while real wages have earned in just four months during this period.
