Source: AFP
Japan’s largest union said on Friday it had secured the biggest wage increases since 1991 in preliminary data fueling speculation that the central bank will finally move away from its overly loose monetary policy.
The Rengo union said that in spring wage talks so far, its members had secured wage increases of almost 5.3 percent on average, compared with 3.8 percent at this point last year.
Wage growth has been sluggish in Japan for decades, and the government partly blames it for the economy’s woes.
But hopes were high for Rengo’s negotiation after major companies such as Toyota and Panasonic fully conceded to their workers’ demands.
The announcement will be closely watched by economists looking for signs that the Bank of Japan could soon scale back long-standing monetary easing policies.
Bank governor Kazuo Ueda called the spring talks “an important point” in discussions about when and how to make the long-awaited change.
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Central banks around the world have raised interest rates in recent years to tackle rising inflation, but the BoJ has maintained its negative interest rate and other measures aimed at stimulating the stagnant economy.
Its decision to adhere to these policies has sharply weakened the yen against the dollar.
Even so, the bank has stressed it needs to see a “virtuous cycle” of rising wages and sustained demand-driven inflation of two per cent before it changes course.
The bank will announce its policy decision on Tuesday.
“The first tally of Rengo’s responses … should be very encouraging for the Bank of Japan to review policy at its March meeting,” said BNP Paribas chief economist Ryutaro Kono.
“Strong Trend”
Rengo said about half the workers in its member unions had secured an average raise of 5.28 percent, or 16,469 yen ($110) a month.
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That was lower than members’ demands for an average increase of 5.85 percent, but Rengo chief Tomoko Yoshino said “negotiators were very aggressive in their demands.”
Yoshino declined to comment on next week’s Bank of Japan decision, but said factors such as rising prices and labor shortages have fueled pressure for higher wages.
These are on top of long-standing issues such as chronically low wages and the gender pay gap, he added.
Prime Minister Fumio Kishida urged business leaders to raise wages faster than inflation.
Source: AFP
“I’m encouraged to see a strong upward trend in wages, even higher than last year,” he told a meeting of business and union leaders on Wednesday.
Nissan and Mitsubishi Heavy Industries are also among the Japanese companies that have given unions everything they asked for this year.
Nippon Steel and Suzuki have even reportedly offered more than their unions had asked for.
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“Japan’s chronic labor shortage supports the trend,” Nobuko Kobayashi, head of Asia-Pacific strategy execution at consultancy EY, told AFP ahead of the announcement.
“Stable and sustained wage growth alongside inflation of around two percent annually will mark Japan’s exit from decades of deflation,” he said.
Japan narrowly avoided a technical recession in the second half of 2023, but economists say the world’s number four economy remains in recession.
National Australia Bank’s Gavin Friend told the NAB Morning Call podcast on Thursday that “everyone is now waiting” for the central bank to lift interest rates.
“Really what the BoJ is looking for is a significant breach or move higher than last year’s first reading on the Rengo survey,” he added.
Source: AFP