Incomes in Japan are forecast to rise once again in inflation-adjusted terms if the yen continues to strengthen, finally bringing to an end a record-setting and demoralizing decline in real pay.

The Japan Research Institute anticipates real wage growth turning positive in the July-September quarter assuming ?155 to the dollar. On Wednesday, the currency broke that level and kept going, staging a dramatic comeback from the nearly ?162 level in early July.

¡°It seems most plausible that the yen¡¯s weakness is at its peak now and the currency will begin to appreciate,¡± said Shinichi Nishioka, a senior researcher at the Japan Research Institute.

The real rise in wages is expected to continue in the October-December quarter if the yen hits ?151 and into the January-March quarter next year, if the yen goes to ?148, according to the Japan Research Institute.

Inflation has been stubbornly high in Japan.

In June, the rate was 2.8%, the same as the month before and close to the 3.0% reported in the United States. Japanese households have been struggling to make ends meet as the prices of some goods and services jump and as income fails to keep up.

Real pay fell for a record 26th straight month through May.

The falling yen has been at least partly blamed for the squeeze being felt by Japanese households. As the currency weakens, the prices of imported goods rise, and that feeds into inflation, which eats away at the buying power of wages.

With the shunt¨­ spring offensive wage negotiations yielding headline 5.1% wages increases, forecasts suggest that that will feed into the economy and lift inflation-adjusted pay, as long as the yen cooperates.

Yuya Kikkawa, an economist at Meiji Yasuda Research Institute, wrote in a report released earlier this month that the decline in real wages will end in September as long as the yen stays at about ?155 to the dollar.

Analysts have also run the numbers on the possibility of the currency remaining weak, and they say this could lead to a stagnation in inflation-adjusted pay and possibly a continued decline.

¡°If the yen were to stay at the ?160 level for an extended period of time, we estimate that the real wage growth would be zero. If it weakens further to around ?170, real wages would continue to fall,¡± said Nishioka.

According to an estimate by the Japan Research Institute, a 10% fall in the yen¡¯s value annually would increase the annual income of workers at large manufacturing companies by 6%, but it would mean a roughly 2% decrease for employees at small and midsize nonmanufacturing companies.

Since nearly 65% of Japan¡¯s workers are employed by small and midsize nonmanufacturing...