This monthly report on key labor statistics published on June 30, 2025, provides a comprehensive analysis of Japan's employment market conditions and economic indicators.
According to the June 2025 Monthly Economic Report, the economy is experiencing a gradual recovery, though uncertainties remain due to U.S. trade policies. While improvements in employment and income conditions along with various policy effects are expected to support continued moderate recovery, downside risks from U.S. trade policies and concerns about the impact of sustained price increases on consumer sentiment persist. Careful attention must also be paid to fluctuations in financial and capital markets.
Employment conditions continue to show steady improvement, with the number of employed persons increasing significantly by 780,000 year-on-year in May. The regular employment index for establishments with five or more employees rose 1.7% year-on-year in April, comprising a 0.9% increase in regular workers and a 3.5% increase in part-time workers, indicating particularly notable growth in non-regular employment.
The unemployment rate remains stable at low levels, with the seasonally adjusted unemployment rate for May at 2.5%. The labor market supply-demand balance continues to be tight, maintaining favorable conditions for job seekers. The low unemployment rate reflects structural labor shortages and confirms strong corporate hiring intentions.
The job openings-to-applicants ratio maintains high levels at 1.24 in May (seasonally adjusted), indicating continued tightness in the labor market. The situation where job openings significantly exceed job seekers persists, demonstrating companies' proactive stance toward securing human resources. This level suggests expanding job-switching opportunities for workers and continued upward pressure on wages.
Wage trends show mixed results. Total cash earnings for establishments with five or more employees increased 2.0% year-on-year in April, continuing the upward trend in nominal wages. However, real wages declined 2.0% when adjusted by the consumer price index (excluding imputed rent) and 1.5% when adjusted by the general index, as price increases continue to outpace wage growth.
Working hours show a declining trend, with total actual hours worked at establishments with five or more employees down 1.3% year-on-year in April, and scheduled hours worked also declining by 1.3%. While work style reforms are promoting appropriate working hours, overtime hours in manufacturing (seasonally adjusted index) increased 2.1% month-on-month, showing variations by industry.
Price increases continue, with the consumer price index (general) rising 3.5% year-on-year in May. These price increases affect household purchasing power through real wage erosion and represent a significant factor impacting the labor market. Price trends are expected to significantly influence future wage negotiations and employment policies.
Consumer spending in worker households increased 5.3% nominally and 1.2% in real terms year-on-year in April. While the substantial nominal increase reflects price rises, real growth remains relatively modest, indicating limited actual consumption expansion by households.
The industrial production index shows mixed movements, declining 1.1% month-on-month in April and rising 0.5% in May on a seasonally adjusted basis. Manufacturing production forecasts indicate a 0.3% increase expected for June and a 0.7% decline for July, suggesting a cautious outlook for production activities.
Looking ahead, labor market tightness is expected to continue with sustained upward pressure on wages. However, real wage erosion due to price increases may affect household consumption behavior. With external risks including U.S. trade policies and financial market fluctuations, achieving sustainable economic recovery through improvements in employment and income conditions remains a critical challenge. The balance between corporate productivity improvements and appropriate wage setting will be key to labor market stability going forward.