MNI BRIEF: BOJ Sees Positive Wage Shocks Pushing Up Prices
MNI (TOKYO) - The Bank of Japan expects wage hikes to increase upward pressure on prices as recent data showed firms' positive wage-setting behaviour is increasing inflation, the BOJ’s October Outlook Report’s full text showed on Friday.
“Wage shocks will serve as a more significant catalyst for price increases than the average relationship observed during low inflation period and will push up prices,” the report said.
While the rise in import prices, such as energy and food, drove inflation after the pandemic, it could not explain recent pressure and supply, and demand conditions, the report stated.
“Developments in the minimum wage and services prices in the CPI by region suggest that the impact of minimum wage hikes on services prices is estimated to be positive and statistically significant. If hikes in the minimum wage continue, they are likely to push up prices, especially of services. During the period preceding the pandemic and most recently, labour shortages have been severe among both small-sized and large firms and across a wide range of industries."
The BOJ board held the policy rate steady at 0.25% on Thursday. While Governor Kazuo Ueda highlighted uncertainty, he did not completely shut down potential for a December hike. (See MNI BOJ WATCH: Ueda Opens Door To Dec Hike, Eyes U.S., Mkts)