Japan’s job market tightens in positive sign for wages, BOJ

JAPAN’S labour market tightened in September, indicating sustained pressure on companies to raise wages ahead of the Bank of Japan’s (BOJ) policy meeting later this week.

The job-to-applicant ratio edged up to 1.24 from 1.23 in August, meaning that there were 124 jobs offered for every 100 applicants, the labour ministry reported on Tuesday (Oct 29). Economists had forecast no change from 1.23.

A separate report from the Ministry of Internal Affairs showed that the jobless rate decreased to 2.4 per cent in September. The number of workers rose by 270,000 from a year ago, while those without jobs decreased by 90,000.

The tight labour market is a positive environment for the central bank as it prepares for its policy meeting concluding on Thursday. Higher demand for workers will pressure companies to hike salaries to retain them, potentially feeding into the virtuous cycle between prices and wages – a goal that the bank seeks as it mulls its next interest rate hike.

While economists mostly see an additional hike either in December or January, the BOJ is widely expected to keep rates unchanged on Thursday. Governor Kazuo Ueda said last week that the central bank has time to consider its next policy steps, signalling no rate hike in October, even as the yen fell to an almost three-month low. In the latest Bloomberg survey, almost all economists anticipated no changes this time, while half expected action in December.

At the end of the two-day meeting, the BOJ will also release its updated outlook report. In the latest issue in July, the bank noted that increasing labour participation among women and the elderly would tighten the labour market during the course of the economic recovery. Tuesday’s report showed an increase of 430,000 female workers from a year earlier. BLOOMBERG