Japan’s wage growth holds momentum after small companies reach deals
The outcome will keep the country’s central bank on track for a near-term rate hike
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[TOKYO] Japan’s largest labour union group reported that workers under its umbrella secured an average pay increase exceeding 5 per cent in this year’s wage talks, even after the results of smaller companies were factored into the tally.
It is an outcome that will keep the Bank of Japan (BOJ) on track for a near-term interest-rate hike.
Unions under the federation known as Rengo have so far won an average wage gain of 5.08 per cent, an updated tally released on Friday (Apr 17) revealed.
While down from an initial 5.26 per cent, the overall figure stayed above the group’s 5 per cent target for a third straight year.
The latest tally includes agreements from 2,156 companies with 300 or fewer employees, up from 552 in the initial report in March.
Smaller companies tend to report wage-hike agreements later than large businesses, and those results have pulled down the overall average in recent years.
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Wage trends at smaller companies remain a key focus for the BOJ as it heads into its policy meeting in April.
Governor Kazuo Ueda said after the March meeting that the extent of wage gains among small and medium-sized enterprises (SMEs) will be central as the BOJ mulls the timing of its next move.
He added that early information indicated broader spillovers than in past years, while stressing the need to assess Rengo’s upcoming reports with fuller SME coverage.
Relatively firm wage growth among smaller companies would support the BOJ’s path toward further rate hikes, though Middle East uncertainty is clouding the immediate outlook.
Bets on a rate hike at the meeting from Apr 27 to 28 have receded in recent weeks as the conflict escalated, going by pricing in the overnight swaps market. BLOOMBERG
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