Still springtime for Japanese equities

AS JAPAN welcomes the sakura season, Japanese workers are enjoying their second consecutive year of salary increases, after decades of wage stagnation.

Each year, the spring wage negotiations (or shunto) bring together unions and management to negotiate wages ahead of the start of Japan’s fiscal year in April. This year’s wage round has concluded, and Japan’s largest companies have agreed to raise wages by 5.28 per cent, higher than the 3.58 per cent seen last year.

Wage hikes need to be set against Japan’s inflationary backdrop, with core inflation at a four-decade high of 3.5 per cent. With the 2 per cent inflation target and potential wage increases in sight, the Bank of Japan (BOJ) finally abandoned decade-long policies which were designed to fight deflation.