MNI BRIEF: BOJ To Focus On Continued Positive Wage Setting

The Bank of Japan must examine whether firms' positive wage-setting behaviour continues, from the viewpoint of achieving the bank’s 2% target in a sustainable and stable manner, the full text of the BOJ Outlook Report said on Thursday.

“It should be noted that the labour share at SMEs is higher than at large firms, and the pace of decline in the labour share is slower than at large firms, which may act to hold down wages,” the reported said.

Analysis of microdata from the Tankan and other sources showed even SMEs with a high labour share have tended to implement relatively large wage increases in an environment in which profits can be expected to improve as a result of higher output prices.

“Going forward, whether firms, including SMEs, make further progress in passing on price increases and improving profits and this leads to sustained increases in wages warrants careful attention,” the BOJ said.

The Bank of Japan hiked its policy rate 15 basis points on Wednesday, its first increase since March. (See MNI BOJ WATCH: Ueda Keeps Rate Hike Options Open)