Japan’s labor market continued to show tightness in September, according to data released by the Ministry of Internal Affairs and Communications and the Ministry of Health, Labour and Welfare on October 29.

The unemployment rate fell to 2.4%, down from 2.5% in the previous month, while the job-to-applicant ratio rose to 1.24 from 1.23, highlighting persistent labor shortages in the Japanese workforce.

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Japan’s largest labor union, Rengo (the Japanese Trade Union Confederation), also announced its intention to seek a 5% wage increase in next year’s negotiations, following a record 5.1% raise this year—the largest in 33 years.

This tight labor market offers a relatively positive signal for the Bank of Japan (BOJ), which has long aimed to support moderate inflation through real wage growth as part of its strategy to normalize monetary policy.

In March, the BOJ raised rates for the first time in eight years, ending its negative interest rate policy and yield curve control. In July, it raised rates again, suggesting it would consider further hikes if inflation met expectations.

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While these comments initially triggered significant market volatility, the BOJ has since clarified that it would avoid rate hikes during periods of economic instability, aiming to calm market concerns. Nevertheless, its commitment to policy normalization remains clear.

The market broadly expects the BOJ to hold rates steady in October, with further rate hikes possible in December or January.