Japan business lobby to urge BOJ to achieve ‘moderate’ inflation: Nikkei

JAPAN’S business lobby Keidanren will urge member firms to consider raising base salaries next year and call on the central bank to achieve “moderate” inflation, the Nikkei newspaper reported on Saturday (Oct 28).

In a draft of its guidance on next year’s wage negotiations, Keidanren will call on companies to “maintain and strengthen” the momentum for raising wages beyond next year, the paper said.

“It’s beneficial to examine raising pay, including by revising base salaries, as needed,” according to the draft guidance obtained by Nikkei.

The Keidanren, a powerful lobby with close ties to the administration, will also “strongly urge” the Bank of Japan (BOJ) to guide monetary policy to achieve “moderate inflation”, the paper said.

With inflation exceeding its 2 per cent target for more than a year, the BOJ is under pressure to end its decade-long ultra-loose monetary policy.

BOJ governor Kazuo Ueda has stressed the need to keep low interest rates until stronger wage gains help Japan sustainably achieve 2 per cent inflation backed by solid consumption.

Japanese wages had remained stagnant for decades until last year, when rising raw material costs pushed up inflation and piled pressure on firms to compensate employees with higher pay.

Major companies agreed to average pay hikes of 3.58 per cent this year, the highest increase in three decades, and some of them have pledged to keep raising wages next year due in part to intensifying labour shortages.

But there is uncertainty whether smaller companies will follow suit as rising raw material costs and slowing global growth weigh on profits, analysts say.

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