Japan Wage Growth?

 Article Source: https://mainichi.jp/english/articles/20230515/p2g/00m/0bu/016000c

Article:

TOKYO (Kyodo) -- Prime Minister Fumio Kishida said Monday closer macroeconomic policy coordination is needed with the Bank of Japan as the government seeks to examine whether Japan can attain sustainable and stable wage growth and avoid sliding back into deflation.

While the outcome of this year's wage negotiations between labor unions and management is expected to be the best in three decades, Kishida said spurring wage increases remains his administration's "highest priority."

Ideas:

Macroeconomic policy coordination is sometimes a tricky task as the central bank and the government don't see the same with regards to policy. For example maybe some in the Japanese government prefer to see the Bank of Japan following what the US fed is doing the the key interest rate to try and lower inflation.

Wage increases seem to be the key for increased economic growth as more wages might translate into more consumer spending and more consumer demand in the future.

But the wage increase have to be enough for the average wage earner to feel good about his or her wage increase to the point that they will actually use it in economy and not just save it.

Article:

The remarks by Kishida, who has a goal of realizing both economic growth and redistribution of income, come as the BOJ also views wage growth as vital.

In its first policy guidance since Governor Kazuo Ueda became governor last month, the central bank added a specific reference to the need for pay hikes in attaining its 2 percent inflation target.

Ideas:

Again just what is Prime Ministers' plan for economic growth and redistribution. Is it just wage increases or is there something else in future.

Wage growth alone would be good enough if wage increases were enough to help the wage earners and get them to spend in the economy.

Yes, wage increases over 2 percent would be good but inflation is much higher than that so wage increases should, in reality be higher than the inflation rate.

Wage earners, consumers are not going to spend much or very little if they don't see wages increasing to the point that they can cover their monthly costs and have some leftover for extra spending.

Article:

"We need to foster perceptions that Japan will not return to deflation. We will achieve an exit from deflation and sustainable economic growth led by the private sector," Kishida told a meeting of the Council on Economic and Fiscal Policy.

The key advisory panel, which includes private-sector representatitives, will follow and assess wage developments, a government official said.

Ideas:

Deflation is the result of no wage increases for too long along with weak consumer demand or consumer spending in the Japanese economy. 

As customers were reluctant to spend, with no wage increases for very long time, companies had no choice but to lower their prices, which of course contributed to deflation. 

Of course deflation was/is not all bad as maybe it helped many in society but overall demand and consumer demand has remained too low for too long

Article:

During the annual "shunto" wage negotiations between labor unions and management groups, companies have agreed to raise pay by an average of 3.67 percent, according to data released last week by the Japanese Trade Union Confederation.

Japan's consumer inflation has topped the BOJ's 2 percent target for a year, largely due to higher import costs.

Ideas:

While a 3.7 percent increase is very good is it going to enough for all wage earners or be enough to spur consumer demand and consumer spending in the economy to increase consumer inflation.

Consumer inflation, these days, is nothing more than companies passing-on their costs to the next in the supply chain including the final customer. 

It has nothing to do with increased consumer demand or consumer spending in the Japanease economy at this time.

Time will tell if the wage increases are enough to offset increases in inflation and consumers/wage earners begin to spend in the economy.

Article:

Ueda told the panel that the central bank will maintain monetary easing to achieve stable inflation accompanied by wage growth.

Nobuhiro Kiyotaki, an economics professor at Princeton University, said the "trauma" of deflation since the late 1990s should not prevent the BOJ from making the right policy decisions.

Ideas:

Just what is the correct policy to achieve stable inflation as it seems the US and the EU with policies haven't been able to lower inflation that much yet. 

Japan's policy is in contrast to the US policy related to inflation so which policy or which strategy has had the most inpact on inflation.

Only time will tell which strategy has had the most impact over time, as both countries or course are tyring to do the same thing but using differnt policy strategies. 

Making the right policy decisions sometimes is deciding which policy or which strategy has the least side effects to the economy overall.

Article:

He argued powerful monetary easing should be removed when the inflation rate stabilizes between 1 and 2 percent, saying that the BOJ's program to keep long-term interest rates depressed is susceptible to speculators, if it persists for an extended period.

The government and BOJ have a joint accord under which the bank will implement monetary easing to achieve the 2 percent inflation target "at the earliest time possible."

Kishida and Ueda have agreed there is no immediate need to revise the decade-old document.

Ideas:

Most likely the present governor of the Bank of Japan is not going to anything drestic as a way to not have the former governor of the Bank of Japan to lose face.

For example if the Bank of Japan increases the key rate too much too soon that might be signal that the previous policies were not the best choice for the economy or the Bank of Japan.

So the BOJ is going to be slow in deciding when to make any changes and the inflation situation is actually working in their favor, at this time, to not make any changes anytime soon.

The 2 percent inflation target might take a long time to achieve so they have a long time to make any needed changes.

Have a nice day and be safe!