Real wages in Japan in May fell 2.9% on year, threatening to unravel official plans for accelerated national economic growth based on higher pay and subsequent consumption.

The May on-year fall in real pay was larger than the revised 2% on-year decline logged in April, was the fifth-straight month of shrinking wages, and marked the largest drop since September 2023, reported the Ministry of Health, Labor and Welfare (MHLW) on Monday.

Nominal wages, or the average total monthly cash earnings per worker including base and overtime pay, grew a modest 1% on year to 300,141 yen in May.

However, Japan's core consumer price index (CPI-core), that strips out fresh food bills, rose 3.7% on year in May, thus more than negating the smaller rise in nominal pay.

The shrinking pay comes despite this year's spring round of labor negotiations, in which Japan's companies agreed to boost wages by an average 5.25% on year, according to the country's largest trade union confederation.

However, Japan's unions generally represent workers at larger enterprises.

In addition, Japanese companies this May reduced the amount of special or bonus pay extended, compared with a year earlier, according to MHLW data.

Japan's soft pay in May continued despite the nation having "tight" labor markets by the standards of other developed nations.

There were 124 job openings for every job hunter in May, reported the MHLW.

Despite the high level of open jobs to the unemployed in May, the ratio was even higher in the pre-pandemic era. In 2018 and 2019, Japan often had more than 160 job openings for every job hunter, according to MHLW data.

Bank of Japan officials, and elected office holders, have reiterated they are seeking a virtuous cycle of rising real wages that lead to sustained higher domestic consumption, thus boosting overall economic growth.

However, in May the Bank of Japa estimated that the nation's gross domestic product (GDP) would grow by a modest 0.5% in the fiscal year started April.

The next Bank of Japan monetary policy meeting is held at the end of July. At the last two policy sessions, the central bank left interest rates unchanged, despite hints it wanted to raise rates to combat inflation in Japan, now running above its 2% on-year target.