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MNI INSIGHT: BOJ Policy Waits On Small Firm Wage Hikes​

(MNI) Tokyo
MNI (Tokyo)

The Bank of Japan is concerned small firms will not be able to raise wages as much as big companies, potentially undermining a "virtuous cycle" of rising wages and prices.

Bank of Japan officials are concerned smaller companies may not be able to lift wages as much as major corporates, potentially undermining the delivery of a "virtuous cycle" of rising wages and prices viewed as key to any shift away from its easing policy, MNI understands.

Policymakers believe major companies passing on higher costs to customers and benefitting from the weaker yen can deliver reasonable wage hikes to relieve workers' cost of living pressures caused by higher food and energy prices. However, they are concerned smaller firms that haven’t fully transferred high costs to prices will have difficulty raising wages as their profits are squeezed, clouding the prospects for broadly stronger wage growth among Japan's workers.

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Bank of Japan officials are concerned smaller companies may not be able to lift wages as much as major corporates, potentially undermining the delivery of a "virtuous cycle" of rising wages and prices viewed as key to any shift away from its easing policy, MNI understands.

Policymakers believe major companies passing on higher costs to customers and benefitting from the weaker yen can deliver reasonable wage hikes to relieve workers' cost of living pressures caused by higher food and energy prices. However, they are concerned smaller firms that haven’t fully transferred high costs to prices will have difficulty raising wages as their profits are squeezed, clouding the prospects for broadly stronger wage growth among Japan's workers.

Keep reading...Show less