Regular wages increased in July by the most in nearly 10 years, aiding Prime Minister Shinzo Abe's efforts to reflate the world's third-biggest economy.

Base pay climbed 0.6 percent from a year earlier, the biggest increase since November 2005, the labor ministry said on Friday. Overall wages adjusted for inflation rose 0.3 percent, the first rise in more than two years, after a steep decline in the previous month.

Japan's shrinking population is pressuring companies to raise pay to attract increasingly scarce workers. For Abe — who is urging businesses to pump more of their cash hoards into wages and investment — the key is for consumers to put the extra money to work in the economy.