“Wage increases at their highest level in 34 years!” In Japan, such headlines dominated the news in 2025. Yet, many of us can’t shake the feeling that “my salary went up, but life doesn’t feel any easier.”

That feeling is not wrong. Even if your nominal wage (the number on your paycheck) increases, if prices rise even faster, you can actually buy fewer goods and services. This true purchasing power of your salary, adjusted for price changes, is called “real wages.”

In this article, using the latest data as of late November 2025, we’ll analyze the current state of real wages and simulate what would have happened if your salary had been frozen.

The 2025 Race Between Wages and Prices

First, let’s look at the official data as of September 2025.

Indicator	Value (Year-over-Year)
Nominal Wages (Total Cash Earnings)	+1.9%
Consumer Price Index (Prices)	+2.9%

Prices are from the “General Index,” wages from the “Monthly Labour Survey”

This shows that while wages increased by 1.9%, prices rose by 2.9%. In other words, wage growth is not keeping pace with price increases.

This gap directly impacts our purchasing power. The real wage figure published by the Ministry of Health, Labour and Welfare for the same month was -1.4% year-over-year, marking nine consecutive months of decline. This means the amount of goods we can buy with our salary has decreased by 1.4% compared to a year ago.

What If Your Salary Had Been Frozen? A Sobering Simulation

Now, to the main topic. If your salary hadn’t increased at all in 2025 (i.e., it was frozen), what would have happened to your real wages?

The calculation is straightforward.

実質賃金の変化率 ≈ 名目賃金の変化率 - 物価上昇率

Change in Real Wages ≈ Change in Nominal Wages - Inflation Rate

Let’s plug in the numbers:

• Change in Nominal Wages: 0%
• Inflation Rate: +2.9%

実質賃金の変化率 ≈ 0% - 2.9% = -2.9%

Change in Real Wages ≈ 0% - 2.9% = -2.9%

This means if your salary had been frozen, your real purchasing power would have dropped by approximately 3%. This is the equivalent of an effective “3% pay cut.”

For someone earning 5 million yen annually, this translates to losing about 150,000 yen in purchasing power over the year. With prices soaring, especially for food items, this represents a very difficult situation for household budgets.

Why Are Real Wages Negative Despite “Record Wage Increases”?

This raises a question: “Didn’t the spring labor negotiations (Shunto) achieve a 5.25% wage increase?” There’s a significant gap between this figure and the actual wage statistics (+1.9%).

Here are the main reasons for this gap:

1. Shunto primarily covers large corporations and union members: Shunto results are mainly compiled from relatively large companies with labor unions. The same level of wage increases hasn’t necessarily trickled down to SMEs (which make up over 99% of Japanese companies) or non-regular workers.
2. Wage increase rates include “regular raises”: The wage increase rates announced in Shunto include automatic salary increases based on age and years of service (“regular raises”). The “base-up” component, which raises overall wage levels, was 3.70% according to JTUC-Rengo’s figures.

In other words, when looking at society-wide averages, wage growth is more modest than the splashy Shunto numbers suggest, resulting in wages failing to keep pace with inflation.

What Would It Take to Break Even on Real Wages?

So, what would it take to at least prevent your salary’s value from eroding—to achieve a “break-even” state?

Returning to our earlier formula, the answer is clear:

名目賃金の上昇率 ≧ 物価上昇率

Nominal Wage Growth ≧ Inflation Rate

In other words, if nominal wages rise at the same rate as, or faster than, inflation, you can avoid negative real wage growth.

Based on September 2025 data, a wage increase of at least 2.9% was needed.

From a macro perspective, achieving this requires Shunto outcomes to spread more broadly to SMEs, lifting wages across society as a whole.

But what can we as individuals do?

1. Check your company’s wage increase rate: Verify whether your company’s wage increase exceeds the inflation rate (approximately 3%). If it’s lower, that means an effective pay cut.
2. Upskill and advance your career: It’s essential to increase your market value independently of your company’s performance or policies. We engineers, in particular, can negotiate raises or move to better-paying companies (job hopping) by learning new technologies and delivering higher value.
3. Monitor economic trends: If inflation eases and wage growth momentum continues, real wages could turn positive in 2026. Regularly checking government statistics and understanding how money flows in the economy is crucial for planning your career strategy.

Conclusion

As of November 2025, despite the “wage increase” mood, it has been a tough year with purchasing power continuing to decline for many. Those whose salaries were frozen have faced the harsh reality of an effective 3% pay cut.

To win this “race between wages and prices,” beyond addressing structural issues in society, each of us needs to enhance our own value and build our careers wisely more than ever.

Start by accessing the primary information published by the government and accurately understanding the current situation.

That’s all from the Gemba—a simulation of inflation and real wages as of late November 2025.

References

• 消費者物価指数（CPI）トップページ | 総務省統計局
• 毎月勤労統計調査トップページ | 厚生労働省
• 2025春季生活闘争 | 連合（日本労働組合総連合会）