Japan faces a growing cost of living crisis as inflation continues to outpace wage increases. Fresh data from the labour ministry shows inflation-adjusted wages fell by 1.3% in 2025, marking a third straight year of shrinking real incomes. Workers earned an average of 355,919 yen (US$2,280) per month, including bonuses and overtime, which is 2.3% more than the previous year in nominal terms but still below inflation. Inflation averaged just over 3%, beating the Bank of Japan’s 2% target for the fourth year in a row. Price hikes hit food staples hardest, with rice prices soaring by more than 60% in 2025. Coffee, chocolate, and household goods also became more expensive. Energy costs rose despite government efforts to cap petrol and electricity prices. This widening gap between wages and inflation is putting pressure on household budgets and threatens to derail economic recovery plans.