Japan's actual wages have risen by the largest amount since 2021, and the Bank of Japan's interest rate hike path remains unchanged.

After adjusting for inflation, Japanese workers' wages have seen the fastest year-on-year increase since 2021, providing support for the Bank of Japan to consider raising interest rates earlier this month. Japan's Ministry of Health, Labour and Welfare announced on Wednesday that real wages rose by 1.9% year-on-year in February, marking the second consecutive month of increase, higher than economists' previous expectations of a 1.3% increase. Nominal wages increased by 3.3%, surpassing the market's general expectation of 2.7%. Base wages rose by 3.3%, the largest increase in nearly 34 years; when excluding bonuses, overtime pay, and using the fixed core wage index to avoid sampling biases, full-time employees saw a 3.1% year-on-year increase, the largest since comparable data in 2016. At a time of this wage increase, the Bank of Japan has been searching for reliable signals to confirm that sustained wage growth will drive consumer spending, leading to demand-driven inflation. The rise in real wages benefits from a temporary cooling of inflation, partially due to utility subsidies implemented during the winter. As these subsidies gradually phase out, coupled with the rise in oil prices due to conflicts in the Middle East, inflation may pick up again in the coming months.