MNI BRIEF: BOJ Notes Higher SME Wages, Eyes Govt Data

The Bank of Japan expects ongoing tighter labour market conditions at smaller firms to increase wage pressure this year, according to the full text of the BOJ’s Outlook Report released Monday.

“The pace of improvement in corporate profits has been slower at smaller enterprises (SMEs) than at large firms and this may suppress the growth rate of wages at SMEs,” it said. The report said regular employee wages at SMEs tend to be more responsive to tight labor market conditions than those at large firms, while labor shortages they face have become more acute, particularly in industries such as services which have experienced a rebound in demand following Covid-19.

“The results of wage negotiations will likely be reflected in actual wages through this summer,” the BOJ added. “Although there remain uncertainties regarding factors such as the future course of wage revisions at SMEs, it is highly likely that the growth rate of scheduled cash earnings will increase clearly this year, and this is likely to underpin private consumption."

A recent BOJ report found smaller firms have raised wages to secure necessary workers amid strengthening labor shortages and high prices (see: MNI BRIEF: Wage Hikes At Smaller Firms Spreading - BOJ Report).