MNI BRIEF: BOJ Focuses On Future Price-Setting Strength

The Bank of Japan will focus on whether forward-looking price-setting behaviour expands to strengthen price rises after the impact of higher import prices dissipates, according to the full text of the Bank of Japan’s October Outlook Report.

“With regard to spillover from wages to prices, developments in services prices – where labor costs account for a high share of output prices – are particularly important,” the report said. Many firms note passing on rising costs, apart from raw material prices, has been difficult, however, "some have started to say that they have raised prices to secure funds for future wage increased,” the report stated.

A gradually increasing number of firms have also changed their behaviour based on the assumption that wages and prices will not increase easily, the BOJ said. “As the economy continues to recover, it is necessary to closely monitor whether the linkage between wages and prices will strengthen further,” the BOJ said.