Japanese Economy: Real Wages Turn Positive

■ Positive real wages coupled with expectations of wage increases support consumption and inflation. 

■ Economic recovery, improved consumption, and stable expectations. 
 
In January's monthly labor statistics, real wages (1.4% year-on-year) turned positive for the first time since December 2024. The main reason for this positive turn is that government measures to address inflation have slowed the rate of increase in consumer prices, while nominal wages have also grown steadily. In January, total cash wages (3.0% year-on-year, common business sector: 1.9% year-on-year) and the equivalent of basic wages (3.0% year-on-year, common business sector: 2.2% year-on-year) both accelerated. The spring labor negotiations in 2026 (the first statistics will be released on March 23) are expected to achieve wage increases comparable to last year, and the resulting wage increases are expected to support consumption and keep upward price pressure in place. 
 
The February business climate observer survey showed that the current situation judgment DI (48.9, up 1.3 percentage points from the previous month) rose to its highest level since April 2024, showing a steady recovery since the beginning of the year. The rise in the DI reflecting household-related activities was the main driver of the improvement in February, indicating that government price measures are supporting the recovery of personal consumption. The leading judgment DI (50.0, down 0.1 percentage points from the previous month), although slightly declining, has remained above 50 for two consecutive months, indicating that expectations for the future remain unchanged.