BOJ polling firms' wage plans as oil price slide threatens inflation target

Published Wed, Dec 16, 2015 · 03:43 AM

[TOKYO] The Bank of Japan is polling firms nationwide on their plans to raise wages, with results due out before a key rate review late next month, sources said, underscoring the bank's nervousness over whether firms will do their bit to energise growth by increasing pay.

As speculation of additional BOJ monetary easing simmers, even the report's language on wages may draw the attention of market players scouring for clues on when the BOJ will next act, analysts say.

Wage growth is central to the BOJ's goal of accelerating inflation to 2 per cent, as higher wages give consumers more money to spend, allowing firms to raise prices.

Reflecting the BOJ's close attention to wage growth, all 32 of the central bank's regional branches will be carrying out the survey, sources familiar with the matter said.

The survey's findings will be part of the BOJ's quarterly report on the economic health of regional areas in Japan, due out roughly two weeks before the BOJ rate review on Jan. 28-29, they said.

Some market players expect the BOJ to ease policy again at the January meeting, when it is expected to cut its inflation forecasts as plunging energy costs push down gasoline and electricity bills. "If the survey shows companies won't really raise wages much, that adds to a host of recent weak data on prices and could nudge the BOJ into easing," said Mari Iwashita, chief market economist at SMBC Friend Securities.

Japan's economy is barely growing as China's slowdown hurts exports. Consumer prices are sliding due to the oil rout, making it a near-certainty the BOJ will once again push back the timing for hitting its inflation target.

BOJ Governor Haruhiko Kuroda has said a broad uptrend in prices remains intact, and that the bank won't act unless the oil-induced weakness in inflation persists long enough to discourage firms from raising wages and prices.

Wages rose for the fourth straight month in October but only modestly, as many companies hesitate to boost base salary for permanent employees for fear of increasing fixed costs, which would be magnified by any return to deflation.



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