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Free AccessMNI STATE OF PLAY: BOJ Price View Cautious After Wage Talks
By Hiroshi Inoue
TOKYO (MNI) - Bank of Japan officials expect a slight pickup in the pace of
wage hikes seen in fiscal 2018 to support the current modest economic recovery
but they remain skeptical about its effect of lifting consumer prices toward the
bank's 2% target, MNI understands.
Early results of labor-management negotiations over wages and working
conditions for fiscal 2018 were released Friday after the BOJ's latest policy
meeting on March 8-9, which was a non-event due to the lack of fresh data
concerning wages and inflation.
Preliminary data from the Japanese Trade Union Confederation (Rengo) showed
the average wages for 1.27 million employees at large and small firms (about 2%
of the total number of employees in Japan) would rise 2.16% in fiscal 2018
starting in April, up from 2.06% the previous year. It was the first rise in
three years but fell short of 3% called for by Prime Minister Shinzo Abe.
The focus is on the next BOJ policy meeting on April 26-27, when the board
will release its medium-term growth and inflation projections through fiscal
2020 in the quarterly Outlook Report.
Ahead of the meeting, BOJ officials don't think the slight pickup in total
wages including bonuses will push up lackluster consumer spending sharply as the
pace of base wage increase remains slow. Their view remains unchanged that
consumer prices slow to respond to economic recovery and labor shortages.
--SLOW WAGE HIKES
"Wage hikes for this (fiscal) year are higher than seen in the previous
year but the pace of increase is below 3%. They (BOJ officials) are monitoring
the impact of higher wages on consumer spending and how it will prompt firms to
raise retail prices and raise inflation," a person who is familiar with BOJ
thinking told MNI.
The person added wage growth is expected to accelerate at smaller firms
because labor shortages are forcing some of them to give up taking new orders.
The initial Rengo data showed the average wages for workers at small
businesses would rise 2.17% in fiscal 2018, up from the 2.06% increase in final
figures for fiscal 2017.
In Rengo's initial estimate, the average base wages are expected to rise
0.77% in fiscal 2018, up from the 0.48% increase seen in fiscal 2017.
BOJ officials believe the economy needs a faster rise in base wages in
order to see stronger consumer spending.
BOJ Governor Haruhiko Kuroda has said that total average wages must rise
more than 3% every year for the central bank to anchor inflation around its 2%
price target.
--APRIL MARKUPS EYED
Large companies tend to set new prices in April at the beginning of a new
fiscal year while smaller firms consider changing prices gradually throughout
the year, monitoring closely whether households are accepting markups.
Higher labor and energy costs have been prompting some companies to raise
prices but others are absorbing higher costs by increasing productivity,
restricting consumer prices.
Some firms are still reluctant to raise base wages as that will push up
fixed labor costs. Those companies tend to pay higher bonuses instead.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com
[TOPICS: MAJDS$,MMJBJ$,M$A$$$,M$J$$$,MT$$$$]
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.