Japanese real wages — paychecks adjusted for inflation — grew for a fifth consecutive month in May, marking the longest sustained stretch of real wage gains the country has seen in years. This confirms that Japanese workers are finally outpacing inflation, a condition that has been elusive in Japan's decades-long battle with stagnation. The data strengthens the case that domestic consumption can support the economy without relying solely on exports.
Sustained real wage growth shifts the Bank of Japan closer to further interest rate normalization, which would strengthen the yen and pressure Japanese government bond prices. A stronger yen tends to weigh on export-heavy Japanese equities like Toyota and Sony while boosting domestically oriented sectors. Investors holding international equity ETFs with Japan exposure should watch how quickly this feeds into Bank of Japan policy signals.
Bank of Japan next policy meeting: late July. Japan June CPI inflation print: mid-July. Bank of Japan Governor Ueda public appearances for forward guidance signals.
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