The Bank of Japan (BoJ) and Goldman Sachs have both asked Japanese business leaders to increase wages, with the investment banking major warning that wages ought to increase for "Abenomics" to succeed.
Japan's cost of living shot up to a five-year high in October.
Consumer prices, excluding fresh food, rose 0.9% on an annual basis in October, according to government data. The BOJ has forecast that consumer price growth, excluding the effects of tax increases that come into force in April, would accelerate to 1.3% next fiscal year and to 1.9% in 2015.
However, salaries extended their declines from June 2012.
A lower purchasing power would impact consumer spending, threatening to disrupt Prime Minister Shinzo Abe's efforts to pull the Japanese economy out of weak growth.
BOJ Governor Haruhiko Kuroda, speaking to regional business leaders this week, said he hoped for an increase in basic pay.
Earlier, Goldman Sachs' chief Japan strategist Kathy Matsui also called for higher wages.
The fact that Kuroda himself takes home 38% less than what his predecessor did 15 years ago accentuates the need for immediate salary increases in the world's third-largest economy.
Risk-averse Japanese firms have the cash to hike wages - two decades of sluggish growth and deflation forced firms to put aside cash for several years.
Non-financial private companies held cash and bank deposits worth 220tr yen as of June, which is almost the size of Brazil's annual GDP, according to BOJ data.
However, salaries hikes would take effect only when firms are convinced of sustained earnings growth.
"The government needs to fuel domestic consumption to boost GDP, and the only way is to raise wages," said Satoshi Okagawa, a senior global-markets analyst in Singapore at Sumitomo Mitsui Banking, a division of Japan's second-biggest financial group by market value.
"Policy makers want to convert companies' accumulated earnings into consumer spending, but businesses won't listen to their plea. That's why Kuroda is suffering," Okagawa told Bloomberg.
It would be meaningful for the BOJ to take the initiative by hiking the governor's pay," which is "rather low," said Akio Kato, the team leader of Japanese debt in Tokyo at Kokusai Asset Management, which manages asset worth about $38bn.
"There won't be many companies that increase base salaries unless they can expect sustained earnings growth," said Maiko Noguchi, a former central bank official and a Tokyo-based senior economist at Daiwa Securities, Japan's second-biggest brokerage.
"Modifying existing products doesn't create large demand. Instead, intensifying competition cuts companies' profit margins, and this can't be easily changed by Abenomics," Noguchi told the news agency.
Kuroda versus Bernanke
Kuroda's pay, at about 24m yen ($235,000) for the year ending 31 March, dropped from an inflation-adjusted 39m yen in fiscal 1998, according to a 29 November BOJ statement.
By comparison, US Federal Reserve Chairman Ben S Bernanke would take home $199,700 this year, while Bank of England Governor Mark Carney would take home a basic salary of £480,000 pounds ($784,000).
European Central Bank President Mario Draghi was paid €374,124 ($511,200) last year.
Industry Hoards Gains
In October, a sizeable number of Japanese companies said they would save, and not spend, the funds generated by a forthcoming cut in the corporate tax rate, a move that could further threaten Abe's growth strategy.
Three out of 10 companies said they would bank any funds from a lower corporate tax rate, a Reuters survey of 400 companies showed.