Nominal wages in Japan rose just 1% year-on-year in May 2025, marking a third straight month of deceleration and falling well short of market expectations of a 2.4% increase. It was the weakest growth since March 2024, driven largely by an 18.7% plunge in special (bonus) payments. Meanwhile, real wages - adjusted for inflation and a key gauge of consumer purchasing power - fell 2.9%, extending their decline to a fifth consecutive month and posting the steepest drop in nearly two years. The broader wage data has yet to reflect the record pay hikes agreed during this year’s spring labor negotiations, as many smaller, non-unionized firms are slower to implement wage increases. The tepid wage growth raises fresh concerns about Japan’s economic outlook, particularly amid heightened global uncertainty following new US tariffs. It also complicates the Bank of Japan’s path to policy normalization, with stagnant real incomes likely to dampen consumer spending and stall broader economic recovery.