MNI BRIEF: Price Risk Reduces As Wages Fail To Accelerate -BOJ

Bank of Japan officials doubt whether inflation will stay at troubling high levels as wages rise but fail to accelerate, MNI understands.

While the wage-price virtuous cycle has strengthened from April, recent developments – such as major firms revealing next year's wage increases – remain within forecasts made at the BOJ's April meeting. But wage pressure will increase next year, as firms move to secure workers amid tightening labour market conditions. However, uncertainty remains over wage hikes by other major and smaller firms next year, while higher wages will increase corporate fixed costs.

Bank officials will focus on how corporate price-setting behavior evolves in or after October when pass-through of cost increases will likely peak and whether private consumption remains solid. They expect high staple prices to weigh on private consumption, however, pent up demand should remain supportive. Real income remains in negative territory amid high prices, but bank officials expect it to turn positive toward the end of this year, easing household's high-price pain.