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BOJ said to judge 1% base-wage gain as minimum for recovery
[TOKYO] Bank of Japan officials assess that average base wage gains of 1 per cent are needed in the coming fiscal year to sustain the economy's emergence from two decades of stagnation, according to people familiar with central bank's discussions.
Such a bump would be double the estimated rise of base wages for the year through March 2015. As a slide in oil prices depresses consumer prices, higher pay will be critical to keep BOJ Governor Haruhiko Kuroda's reflation campaign going. And income gains are needed to sustain consumer spending power, the people said, asking not to be named as the talks are private.
Any failure by employers to respond to pressure from policy makers to boost pay would make it less likely the BOJ will meet its 2 per cent inflation target, putting pressure on the bank to add monetary stimulus. The median estimate of economists surveyed by Bloomberg News is for a base-pay rise of just 0.6 per cent next fiscal year.
"The BOJ will probably be forced to bolster stimulus if wages don't rise next fiscal year," said Yasuhide Yajima, an economist at NLI Research Institute. "Even if base pay increases 1 per cent, it's not clear if the BOJ can achieve the inflation target because 2 per cent is extremely ambitious." BOJ's Realm Prime Minister Shinzo Abe has held regular meetings with business and labor chiefs to try to orchestrate pay increases to sustain a revival in the world's third-biggest economy.
Business and labor leaders struck an agreement to boost base pay by 0.4 per cent this fiscal year following negotiations last spring, according to Rengo, Japan's biggest trade union. Base salaries fell every year before that, except fiscal 2005, back to 1999, according to the labor ministry.
Japanese companies, on track for record profits this fiscal year, have increased bonuses, helping support incomes. Winter bonuses at large companies rose 5.3 per cent on average, according to a survey by the Keidanren, the nation's biggest business lobby.
Consumer prices rose 2.4 per cent in November from a year earlier, boosted by a sales-tax increase in April and higher costs driven by the BOJ's stimulus.
Mr Abe said in an interview with Kansai TV today he wants wage increases to catch up with inflation in about two years.
Kuroda told the Keidanren last month that he has "strong interest" in this spring's wage talks between executives and labor leaders.
Some officials think the central bank should avoid focusing too much on the wage negotiations, which are outside the realm of monetary policy, according to the people.
Rengo said on Dec 2 that its members will seek an increase of 2 per cent or more in base wages. Mr Abe secured an agreement from the Keidanren on Dec 16 that calls on companies to do their utmost to boost pay next fiscal year.
Toyota Motor Corp.'s labor union will seek an increase of more than 6,000 yen in monthly base wages, more than a gain of 2,700 yen this fiscal year, as Japan's biggest automaker predicts a record profit, according to a Nikkei report on Jan 8.