Japanese Economy: Real Wages Show Signs of Stabilizing

■ The decline in real wages has narrowed significantly and is expected to turn positive in January, due to the slowdown in inflation.  

■ The current economic climate has slightly declined, but this is mainly due to short-term factors such as weather. The outlook index has rebounded, and overall expectations remain optimistic. 
 
According to the monthly labor statistics released in December last year, total cash wages (up 2.4% year-on-year, or 2.0% year-on-year on a comparable business basis) accelerated compared to the previous month. The increase in bonuses, which had previously dragged down November, became the main driving factor, resulting in special wages (up 2.6% year-on-year). In addition, although real wages (down 0.1% year-on-year) are still declining, the decline has narrowed significantly. Statutory wages (up 2.2% year-on-year) also maintained steady growth. With factors such as government price countermeasures driving the inflation rate to slow, real wages are expected to turn positive in January. 

 
The January Economic Climate Observer Survey showed that the Economic Climate Judgment Index (ECJI) was 47.6 (down 0.1 percentage points from the previous month), representing a slight decline. After rising to 49.1 last October due to expectations surrounding Takaichi’s government policies, the recent upward trend has stalled, dragged down by factors such as concerns about the yen's depreciation and the impact of persistent inflation on consumer demand. However, the decline in January also appears to have been temporarily affected by weather factors such as heavy snow. On the other hand, the outlook index was 50.1 (up 0.6 percentage points from the previous month), rising for two consecutive months, indicating that market expectations for the future remain intact.