A worker checks machines at a factory in Higashiosaka, Japan, June 23, 2022. REUTERS/Sakura Murakami/File Photo Acquire LICENSE RIGHTS
TOKYO, Oct 12 (Reuters) – Bank of Japan board member Asahi Noguchi said on Thursday that the main focus for the Japanese economy now was to ensure that wage growth momentum was maintained, with an increase in nominal wages by 3% to support efforts to achieve the 2% inflation target.
Noguchi, known for his reflationist views, made the comments in a speech to business leaders in Niigata, north of Tokyo, which analysts viewed as neither dovish nor hawkish.
“Noguchi followed the consensus opinion of board members,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.
“His emphasis on wage growth likely meant that the BOJ will maintain its accommodative policy until wage increases are firmly established after labor talks next March.”
The annual wage negotiations this spring brought the highest wage increases in 30 years, Noguchi noted, calling them “significant” as consumer inflation will slow in the second half of this fiscal year in line with the easing impact of high import bills.
“The biggest focus now is whether or not this (wage growth) momentum will be sustained from here on out.”
Wage trends in Japan, which have been largely stagnant over the past three decades since the bursting of the asset bubble, are being closely watched by global financial markets as the Bank of Japan has stressed that sustained wage increases are a prerequisite for unwinding its massive monetary stimulus.
Noguchi said household inflation expectations are rising steadily, but when wage growth lags behind price increases, consumers have no choice but to reduce spending, as has been seen recently.
Household spending will be held back until real wages or inflation-adjusted wages, which are currently negative, begin to rise to positive levels.
“The BOJ’s task for now is to achieve this (positive real wage growth) through patient monetary easing,” Noguchi said.
Reporting by Tetsushi Kajimoto. Editing by Chang-Ran Kim and Shri Navaratnam
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