Japan’s Real Wages Fall Most Since 2023 As Inflation Bites

Summary:

Japanese workers’ real wages dropped by the most since September 2023 as inflation continued to outpace salary growth, posing a growing problem for Prime Minister Shigeru Ishiba ahead of a key election taking place in about two weeks.

Real wages declined 2.9% from a year earlier in May, compared to economists’ consensus call of a 1.7% fall, the labor ministry reported Monday. Nominal wages rose 1% from the previous year, climbing at a much slower pace than economists expected.

While the drop in real wages shows the pain being felt by voters, the strength in underlying wage trends keeps the Bank of Japan on a path of mulling further interest rate hikes. Base pay increased 2.1%, while a more stable measure that avoids sampling problems and excludes bonuses and overtime showed wages for full-time workers climbed 2.4%, staying at or above 2% for nearly two years.

The sharp drop in real wages highlights the persistent strength of inflation and presents a headache for the minority ruling coalition ahead of the July 20 upper house election. With prices continuing to rise faster than wages, public frustration has grown, pressuring political leaders to come up with more convincing strategies to alleviate the cost-of-living squeeze.

Read: Japanese PM Ishiba’s Make-or-Break Election Campaign Kicks Off

Japan’s key inflation rate stood at 3.7% in May, well above the BOJ’s 2% target, driven by broad increases across essentials, from food to service fees.

With the election just two weeks away, Ishiba’s Liberal Democratic Party has pledged a ¥20,000 ($138) cash handout per adult, along with additional initiatives to spur wage growth. However, recent opinion polls suggest the one-off boost isn’t popular among voters, many of whom are leaning toward opposition party proposals of cutting the sales tax.

On the monetary policy front, while weak real wages remain a concern, ongoing nominal pay increases may provide the BOJ with room to consider proceeding with further rate hikes. The central bank is closely monitoring wage and price dynamics as it evaluates the timing of its next move amid global tariff uncertainty.

The BOJ’s next policy decision is due on July 31, with markets broadly expecting the central bank to maintain its benchmark rate at 0.5%.

Source: Bloomberg Europe

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Liam Peterson

U.S. President Donald Trump said on Sunday that the U.S. was nearing multiple trade agreements and will begin notifying partners of impending tariff increases by July 9, with the new rates set to take effect on August 1.

Treasury Secretary Scott Bessent told CNN’s “State of the Union” the administration plans to send letters to around 100 smaller trading partners. Those countries that fail to finalize agreements by August 1 would see tariffs revert to the steep levels initially announced on April 2.

While speaking to reporters, Commerce Secretary Howard Lutnick confirmed the tariff schedule, stating that once letters are dispatched, the new rates will begin on August 1.

White House National Economic Council Director Kevin Hassett, on CBS’s "Face the Nation," said, “There are deadlines, and there are things that are close, and so maybe things will push back past the deadline.” He added that final decisions would rest with the president.

Agreements have been reached with the United Kingdom and Vietnam, and limited progress is reported with China, while talks continue with the European Union and India.

In April, Trump introduced a base tariff of 10% on most nations, with extra duties reaching up to 50%. However, he later postponed the implementation of all tariffs above 10% until July 9.

The newly set date effectively gives countries an additional three-week grace period.

Source: Investing

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Benjamin Carter

ICE Brent is trading lower this morning after OPEC+ agreed on a larger-than-expected supply hike of 548k b/d for August, more than the 411k b/d increase seen in the preceding months. This takes total announced OPEC+ supply increases to a little more than 1.9m b/d. And clearly, if OPEC+ were to go with a similar increase for September, it would mean that the group has not only fully restored the intended 2.2m b/d of supply, but also added close to 300k b/d of additional supply. While there was little doubt that OPEC+ had shifted its policy from defending prices to defending market share, this latest boost solidifies this pivot.

Larger supply hikes increase the scale of the surplus in the oil market later in the year. This supports the view that there’s further downside for oil prices. We still expect Brent to trade down towards $60/bbl by year-end amid expectations the group will increase supply again in September. A more bearish supply outlook, combined with demand uncertainty, doesn’t bode well for prices. The latest supply-increase announcement comes at a time when there’s increased uncertainty on the trade front with the Trump administration’s deadline for the 90-day pause in reciprocal tariffs ending on 9 July.

Despite the announced supply increase from OPEC+, Saudi Arabia still went ahead and increased its official selling price (OSP) for August crude oil loadings. Its flagship Arab Light into Asia was increased by $1/bbl MoM to $2.20/bbl over the benchmark.

The latest rig data from Baker Hughes shows that drilling activity in the US continues to slow. The US oil rig count fell by 7 over the last week, which is the tenth consecutive week of declines. Over that period, the number of active oil rigs has fallen by 50 to 425. The dramatic drop in drilling activity leaves downside to US oil output through 2026 and will also leave OPEC+ thinking that its move to defend or even gain market share is working.

Source: ING

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James Whitman

Palestinian-Israeli conflict

Political

The first session of indirect Hamas-Israel ceasefire talks in Qatar ended inconclusively, two Palestinian sources familiar with the matter said early on Monday, adding that the Israeli delegation didn't have a sufficient mandate to reach an agreement with Hamas.

The talks resumed on Sunday, ahead of Israeli Prime Minister Benjamin Netanyahu's third visit to the White House since U.S. President Donald Trump returned to power nearly six months ago.

"After the first session of indirect negotiations in Doha, the Israeli delegation is not sufficiently authorized ... to reach an agreement with Hamas, as it has no real powers," the sources told Reuters.

Netanyahu said, before his departure to Washington, that Israeli negotiators taking part in the ceasefire talks have clear instructions to achieve a ceasefire agreement under conditions that Israel has accepted.

On Saturday evening, crowds gathered at a public square in Tel Aviv near the defence ministry headquarters to call for a ceasefire deal and the return of around 50 hostages still held in Gaza. The demonstrators waved Israeli flags, chanted and carried posters with photos of the hostages.

The latest bloodshed in the decades-old Israeli-Palestinian conflict was triggered on October 7, 2023, when Hamas attacked southern Israel, killing around 1,200 people and taking 251 hostages, according to Israeli tallies.

Around 20 of the remaining hostages are believed to be still alive. A majority of the original hostages have been freed through diplomatic negotiations, though the Israeli military has also recovered some.

Gaza's health ministry says Israel's retaliatory military assault on the enclave has killed over 57,000 Palestinians. It has also caused a hunger crisis, displaced the population, mostly within Gaza, and left the territory in ruins.

Source: Reuters

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James Whitman

Economic

The United States is close to finalizing several trade agreements in the coming days and will notify other countries of higher tariff rates by July 9, U.S. President Donald Trump said on Sunday, with the higher rates scheduled to take effect on August 1.

Trump and other top officials had flagged the August 1 date earlier, but it was unclear if all tariffs would increase then.

Asked to clarify, Commerce Secretary Howard Lutnick told reporters the higher tariffs would take effect on August 1, but Trump was "setting the rates and the deals right now."

Trump in April announced a 10% base tariff rate on most countries and additional duties ranging up to 50%, although he later delayed the effective date for all but 10% until July 9. The new date offers countries a three-week reprieve.

U.S. Treasury Secretary Scott Bessent told CNN's "State of the Union" earlier on Sunday that several big announcements of trade agreements could come in the next days, noting the European Union had made good progress in its talks.

He said Trump would also send out letters to 100 smaller countries with whom the U.S. doesn't have much trade, notifying them that they would face higher tariff rates first set on April 2 and then suspended until July 9.

"President Trump's going to be sending letters to some of our trading partners saying that if you don't move things along, then on August 1 you will boomerang back to your April 2 tariff level. So I think we're going to see a lot of deals very quickly," Bessent told CNN.

Since taking office, Trump has set off a global trade war that has roiled financial markets and sent policymakers scrambling to guard their economies, including through deals with the U.S. and other countries.

Kevin Hassett, who heads the White House National Economic Council, told CBS's "Face the Nation" program there might be wiggle room for countries engaged in earnest negotiations.

"There are deadlines, and there are things that are close, and so maybe things will push back past the deadline," Hassett said, adding that Trump would decide if that could happen.

'I HEAR GOOD THINGS'

Stephen Miran, chairman of the White House Council of Economic Advisers, told ABC News' "This Week" program that countries needed to make concessions to get lower tariff rates.

"I hear good things about the talks with Europe. I hear good things about the talks with India," Miran said. "And so I would expect that a number of countries that are in the process of making those concessions... might see their date rolled."

Bessent told CNN the Trump administration was focused on 18 important trading partners that account for 95% of the U.S. trade deficit. But he said there had been "a lot of foot-dragging" among countries in finalizing trade deals.

Trump has repeatedly said India is close to signing a deal and expressed hope that an agreement could be reached with the European Union, while casting doubt on a deal with Japan.

Thailand, keen to avert a 36% tariff, is now offering greater market access for U.S. farm and industrial goods and more purchases of U.S. energy and Boeing (BA.N), opens new tab jets, Finance Minister Pichai Chunhavajira told Bloomberg News on Sunday.

India and the United States are likely to make a final decision on a mini trade deal in the next 24 to 48 hours, local Indian news channel CNBC-TV18 reported on Sunday, with average tariffs on Indian goods shipped to the U.S. to be 10%, it said.

Hassett told CBS News that framework agreements already reached with Britain and Vietnam offered guidelines for other countries seeking trade deals. He said Trump's pressure was prompting countries to move production to the United States.

Miran called the Vietnam deal "fantastic."

"It's extremely one-sided. We get to apply a significant tariff to Vietnamese exports. They're opening their markets to ours, applying zero tariff to our exports."

Source: Reuters

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Gerik

Economic

Historic Tariff Revenue Surge in the U.S. Reflects Trump’s Aggressive Trade Policy

The United States has recorded an unprecedented $24.2 billion in import tariff revenue for May 2025 the highest monthly total since 1946. This surge follows President Donald Trump’s sweeping 10% global tariff enforcement, which began in early April, and is already reshaping the structure of global trade with the U.S.

Compared to the same month last year, tariff revenue has nearly quadrupled, while increasing more than 25% from April 2025. Notably, this increase occurred even though the total value of imported goods remained largely unchanged, highlighting the direct fiscal impact of the new tariff measures.

An 8.8% Average Tariff Rate and Higher for China

Data from the U.S. Department of the Treasury revealed that the average tariff rate on imported goods in May reached 8.8% the highest in almost eight decades. For every $1 worth of imported goods, Washington collected 8.8 cents in tariffs. This figure rose dramatically for Chinese goods, where the average duty reached 48 cents per dollar, underscoring the ongoing trade friction between the two largest economies.

The revenue boom can be attributed to both the broader tariff scope and higher rates on select categories. Since April 9, nearly all imported goods except for critical exemptions like pharmaceuticals and semiconductors have faced the 10% tariff. In addition, key sectors such as steel, aluminum, and automobiles have been subjected to punitive tariffs ranging from 25% to 50%.

Chinese Imports Plummet Amid Tensions

Accompanying the record-breaking revenue is a significant contraction in trade with China. U.S. imports from China in May totaled only $19.3 billion a 21% drop from April and a staggering 43% decrease year-on-year. This sharp decline signals a deterioration in the trade relationship and rising pressure on Chinese exporters.

Looking ahead, the potential for further tariff escalation remains high. If the current 90-day negotiation window ends as scheduled on July 9 without resolutions, Washington plans to raise tariffs on goods from dozens of countries lacking special trade deals. The European Union is one of the main targets, with Trump threatening a 50% tariff if a bilateral agreement is not reached.

Vietnam Secures Partial Exemption

In contrast, Vietnam has managed to soften the blow through proactive diplomacy. After bilateral negotiations, the U.S. agreed to reduce the initially proposed tariff from 46% to 20%. This is considered a strategic move by both countries to avoid trade disruptions and maintain a stable export flow to the American market.

Projections from the Yale Budget Research Institute estimate that if current policies persist, the U.S. could collect approximately $2.2 trillion in tariff revenue between 2025 and 2034. While these figures may support near-term government finances, they also raise concerns about rising import costs, inflation, and long-term implications for global trade relations.

President Trump’s tariff-first strategy continues to redefine U.S. trade policy, with steep revenue gains offset by diplomatic tension and uncertain outcomes for global commerce. As the deadline approaches, all eyes are on how the administration balances fiscal ambition with geopolitical risk.

Source: Finacial Post

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Gerik

Economic

China–U.S. Trade War

Trump Warns of Sweeping New Tariffs as Trade Pressure Mounts

On July 4, President Donald Trump stated that the U.S. will begin notifying 10 to 12 countries per day over the next five days regarding newly proposed import tariffs, with rates ranging from 10% to as high as 70%. These tariffs, he confirmed, will largely take effect starting August 1, 2025.

Speaking at Andrews Air Force Base, Trump revealed that the administration has finalized the documentation detailing the tariffs and the amounts foreign governments will need to pay in order to continue trading with the U.S. He emphasized that while some flexibility might be shown toward countries currently in talks, the vast majority of the tariffs will begin without delay.

Targeted Partners and Negotiation Tactics

Although Trump did not specify which nations will be included in this tariff wave, he singled out the European Union and Japan as countries that have taken stances unfavorable to U.S. interests in recent trade talks. Earlier this week, he threatened a 35% tariff on Japanese goods an announcement seen by some analysts as a negotiating tactic rather than a firm commitment.

White House Press Secretary Karoline Leavitt and Treasury Secretary Scott Bessent have both acknowledged that deadlines could shift slightly depending on negotiation progress, especially for countries like India. However, Trump’s latest comments indicate that the administration is growing less willing to offer timeline flexibility.

A Sharp Escalation from April Announcements

This new tariff plan marks a significant escalation from April 2025, when Trump introduced retaliatory tariffs then capped around 50% on many U.S. trading partners. The latest announcement pushes those boundaries even further, with maximum rates now reaching 70%, surpassing even those proposed on “Liberation Day,” a symbolic moment for Trump’s trade agenda.

Trump stated that while not all agreements can be finalized at once given the large number of countries involved the U.S. will begin issuing official tariff letters soon. “We’re talking with many nations,” he said, “and we’ll simply tell them how much they need to pay to do business in the United States. That process will move very quickly.”

Global Trade Outlook and Implications

So far, the U.S. has finalized a trade framework with the UK, China, and Vietnam, though specific terms have yet to be published. The impending tariff wave could dramatically alter global trade flows, especially if major economies respond with retaliatory measures or halt negotiations altogether.

Trump’s strategy is aimed at pressuring countries into faster and more favorable trade deals. However, it also introduces significant uncertainty for international exporters, multinational corporations, and domestic businesses reliant on global supply chains.

As the world watches the lead-up to August 1, the administration’s aggressive push signals that trade tensions are unlikely to subside anytime soon especially under a policy environment that rewards quick compliance and penalizes delay.