In a recent interview, Japan’s chief cabinet secretary, Yoshimasa Hayashi, emphasized the importance of broad-based wage hikes among smaller firms to achieve sustained economic growth. This comes as part of Prime Minister Fumio Kishida’s efforts to prevent rising living costs from negatively impacting consumption and the overall economy.
Hayashi highlighted the need for a positive cycle where firms can pass on higher costs through price hikes, allowing them to continue raising wages. He also mentioned the possibility of the government compiling a new fiscal stimulus package later this year to support households in case of further inflation.
The Bank of Japan, which recently exited negative interest rates and bond yield control, may consider raising interest rates if evidence shows that wage hikes are broadening and inflation is stabilizing around the 2% target. While larger firms have offered significant pay increases during annual negotiations, it remains uncertain if smaller companies can keep up.
Hayashi also addressed recent yen declines, stating that it is desirable for currency rates to reflect fundamentals. However, he did not comment on whether recent levels were appropriate. He also saw no immediate need to revise the 2013 joint statement with the BOJ committing to meeting the 2% inflation target.
Critics have argued that the focus on defeating deflation in the joint statement may be outdated, especially as Japan has experienced inflation exceeding the target for over two years. Overall, Hayashi’s comments reflect the government’s commitment to achieving sustainable wage growth and economic stability in Japan.
Source
Photo credit www.hindustantimes.com