MNI BRIEF: BOJ Confident of Non-Maker Wage Hikes

Bank of Japan (BOJ) officials expect wage hikes at non-manufacturers, following the central bank's March Tankan results, MNI understands. Non-manufacturing wages have typically lagged the manufacturing sector.

BOJ officials note non-manufacturing wage hikes are necessary to strengthen the foundation for a positive price- and wage- hike cycle. The diffusion index (DI) showing excessive employment minus insufficient employment among smaller non-manufacturers in the March Tankan fell to -43 in March from -41 in December, meaning more firms are suffering labor shortages. The similar DI among major non-manufacturers fell to -33 in March from -28 in December.

Those DIs fell to pre-Covid-19 levels, indicating the labor shortage strengthened, increasing pressure on those businesses to raise wages to secure employees. The DI among all industries fell to -32 in March from -31 in December, marking the lowest level since September 2019 when it stood at -32.

Major manufacturers had announced bigger wage hikes this year to ease employees' living-cost pain. The focus now shifts to how smaller firms that have not sufficiently transferred high costs to retail prices will lift wages.