Helena Lyng Blak
10 weeks ago

Wage negotiations aid Bank of Japan

How the Japanese unions are paving the way for Governor of the Bank of Japan Kazuo Ueda.
Head office of the central bank of Japan in Tokyo
Leonid Andronov / Shutterstock

Earlier this week, Japan saw unprecedented wage hikes among some of the nation’s biggest employers, including Toyota, with Japanese trade union center Rengo reporting a pay growth of over 5%.

This is exactly what the Bank of Japan (BoJ) has been hoping for, as they are considering ending the era of negative interest rates

“In sharp contrast to the Euro zone, policy officials actually cheer on wage hikes in Japan as they see them as a crucial part of forming a ‘virtuous wage-price cycle’,” explains financial analyst Andreas Steno

Steno argues that it appears probable that these new wage agreements will become more widespread in Japan, with Toyota also strongly encouraging its suppliers to raise salaries more than what has been customary over the past few decades.

“The wage momentum leaves an interesting gap between CPI and wage growth in coming quarters,” he says.

“Which is probably likely to pull the rug from under the momentum among Japanese large caps. When they are faced with input cost increases from suppliers, they are likely going to get squeezed on their own margins short-term.”


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