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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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Free AccessMNI POLICY: BOJ Unsure Wage Uptick Will Lift Inflation Norm
While Bank of Japan officials are increasingly hopeful that an uptick in wage growth will prove sustainable, they remain uncertain whether it will lift medium- to long-term inflation expectations above the subdued norm of recent years and allow a change in the easy policy settings aimed at driving the economy towards its 2% price target, MNI understands.
BOJ officials believe stronger labour conditions will take time to filter through the economy and change inflation expectations that wages and prices will not rise over the medium- to long-term. While newly-appointed Governor Kazuo Ueda has said he will examine possible tweaks to yield curve control in consultation with his board, to address potential bond market dysfunction, he has emphasised that negative interest rate policy remains key to moving towards the 2% target, which he hopes to achieve by the end of his five-year term. (See MNI POLICY: US Recession Could Close BOJ Tweak Window).
Wages at major firms increased considerably this year, while pay at smaller firms will rise somewhat as they face pressure to hold workers amid the tighter labour conditions (See: MNI BRIEF: BOJ Confident of Non-Maker Wage Hikes).
WAGE FACTORS
BOJ officials say higher CPI in fiscal 2022 led to broad wage hikes this year and the Bank's focus has now shifted to whether the gains will lead to greater demand, which will further propel prices higher.
The officials expect major firms to raise wages again next year to shore up valued employees. Wage pressure on smaller firms has also strengthened as they struggle to maintain output levels due to the labor shortage. The number of regular workers switching jobs for higher wages has increased rapidly, adding pressure on employers to lift wages to keep existing workers.
Part-time earnings have also increased considerably, which will push fulltime wages higher. Female and elderly labour participation has peaked, while the number of non-Japanese workers has not increased, adding to the labor shortage. In addition, labor-saving capital investment has strengthened, which will increase productivity and eventually lead to further wage hikes.To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.