The Bank of Japan's October regional economic report found businesses that had recorded strong profits and were suffering from labor shortages are considering raising wages next spring, while others remained cautious about wage hikes amid high costs and a squeeze on profits.
Most regions reported improvements in job and wage outcomes, with the region of Kanto-Koshinetsu - which is home to Tokyo - noting the employment and income situation had stated "to pick up on the whole" and there were "signs of improvement" in the labour market. The ability of companies to deliver sustainable increases in wages is viewed as key to any adjustment in the BOJ's easing policy. (See MNI INSIGHT: BOJ Policy Waits On Small Firm Wage Hikes)
The BOJ report, based on assessments by the Bank's branch managers, highlighted a recovery in exports and production as lockdowns in Shanghai were lifted and supply-side restrictions eased. Some reported falling orders on the back of weak overseas demand.
The report showed firms will increase capital investment to manage the digitalization of their businesses, while some said they had postponed implementation of capital investment as profits are squeezed by rising resource prices.
The impact of a summer surge in Covid-19 cases on private consumption was assessed as limited, although services spending was weighed down by high Covid-19 cases.