You are here

Abe, Kuroda pressure Japan employers to raise wages

Country's weak wage growth has been a hurdle to long-term price gains

BT_20191227_JAPAN27_3987788.jpg
Mr Kuroda has said that the BOJ will ease policy further if the momentum towards its 2 per cent inflation goal comes under threat.

Tokyo

JAPANESE Prime Minister Shinzo Abe and Bank of Japan (BOJ) governor Haruhiko Kuroda both piled pressure on the country's business leaders on Thursday, urging them to lift wages to help boost the economy.

For the seventh straight year, Mr Abe told a year-end gathering of business lobby Keidanren that he hoped companies would boost wages during the annual shunto wage negotiations in spring.

"What's important is investing in people," Mr Abe said. "Since I have been mentioning this every year, I will refrain from emphasising it too much but I have high hopes for next year."

Japan's weak wage growth has been a hurdle to long-term price gains. Wages rose an average 2.1 per cent - well short of the 3 per cent mark that economists said is the minimum needed to help drive inflation toward 2 per cent - at the spring talks this year, according to figures released by the Japanese Trade Union Confederation.

Mr Abe announced this month a stimulus package amounting to around 26 trillion yen (S$321.4 billion) spread over the coming years, with fiscal measures around half that figure to aid disaster relief, protect against downside economic risks and prepare the country for what comes after the 2020 Tokyo Olympics.

"Just so you are aware, I understand wages rose 12 per cent in the year Tokyo Olympics was held about half a century ago," Mr Abe said, referring to the 1964 games.

Meanwhile, BOJ's Mr Kuroda said that the central bank would ease policy further without hesitation if the momentum towards its 2 per cent inflation goal came under threat, a sign of his readiness to top up its already massive monetary stimulus.

He also offered somewhat brighter view on the global economic outlook, bolstering the market view that the BOJ would not rush to alter its current policy for now.

"While continuing to carefully examine various risks, the BOJ will not hesitate to take additional easing measures if there is a greater possibility that the momentum towards achieving the price stability target will be lost," he said.

Mr Kuroda made the remark a week after the central bank kept its target for short-term rates at -0.1 per cent and that for 10-year bond yields around zero per cent, and it stuck to its assessment that the trend in Japan's economy was for continued moderate growth.

Stability in financial markets and some signs that strains on global economy were reducing have bolstered the view that the central bank will avoid easing or tightening policy for the time being. "Uncertainties over the global economy, including developments in US-China trade negotiations, have eased somewhat," Mr Kuroda said. Still, "the BOJ considers that downside risks regarding the outlook for the global economy remain significant".

Mr Kuroda gave few clues on Thursday as to what the BOJ would do next. Years of heavy money printing have failed to fire up inflation to the BOJ's 2 per cent target, forcing it to keep super-low rates despite the damage inflicted on financial institutions' profits.

The world's third-largest economy grew an annualised 1.8 per cent in July-September due to resilient domestic demand, but economists see a contraction in the current quarter as the October's sales tax hike dampened consumer spending.

Mr Kuroda said the 13.2 trillion yen spending package that the government has rolled out can help spur growth backed by the BOJ's powerful easing. BLOOMBERG, REUTERS