Goldman Sachs: Japan’s wage growth this year needs to reach 3%

According to Goldman Sachs economists, wages in Japan need to grow by at least 3% annually over the next two years to help achieve the Bank of Japan’s inflation target. In 2024, wage growth stood at 2.8%.

Akira Otani, an analyst at Goldman Sachs, predicts that nominal wages should increase by 3.0%–3.1% this year and 3.3%–3.4% next year. Such growth would align with the central bank’s inflation objectives.

A Goldman Sachs report notes that strong wage increases are critical to maintaining the cycle of rising incomes and prices in Japan, supporting further monetary tightening.

Goldman Sachs expects two interest rate hikes in 2025, with one likely scheduled for July, though actual wage trends could alter this outlook.

Japan’s core consumer price index (CPI) has exceeded the 2% inflation target for nearly three years, largely due to yen weakness. The Bank of Japan has stated that CPI is on track to meet its target, according to previous central bank reports.