Photo/Illutration Bank of Japan Governor Kazuo Ueda speaks at a news conference on Jan. 23. (Tetsuro Takehana)

Bank of Japan officials are interested onlookers along with company workers in closely monitoring this year’s wage hike negotiations between labor and management to be implemented from spring.

The central bank has made a positive spiral of rising wages and consumer prices a major factor in deciding whether to exit a decade-long ultra-loose monetary policy.

While the consumer price index last year increased by more than the 2-percent inflation goal set by the BOJ as the benchmark for revising its monetary policy, central bank officials attributed that mainly to higher import costs due in large part to the Russian invasion of Ukraine.

At his Jan. 23 news conference, BOJ Governor Kazuo Ueda noted that labor unions were preparing wage hike demands that exceeded last year's. 

“Company executives, especially at major companies, have been making positive comments about such demands,” Ueda said. 

He added that the likelihood of achieving the BOJ’s price hike goal had increased.

Since Ueda took over as BOJ governor last April, interest has focused on when the central bank would move away from the ultra-loose monetary policy instituted by his predecessor, Haruhiko Kuroda, for a 10-year period.

After taking over, Ueda has modified the price hike goal to one that accompanied a similar increase in wages.

In September, Ueda said at a news conference that wage hikes would be one of the most important factors in determining if the increase in consumer prices was a continual one.

The focus on wage hikes reflects the central bank’s stance that consumer price hikes should occur within a larger expansion of the economy brought on by rising wages and more money being spent by consumers on products and services.

But the BOJ has not set an indicator for what level of wage hikes would prompt a change of course in monetary policy.

Ueda has said that such wage hikes would have to extend to even smaller companies, even if the rate of increase was not the same as at large firms and if not all companies hiked their pay.

Even though last year’s wage hike was the largest in 30 years, higher consumer prices meant that real wages continued to lag. In November 2023, real wages decreased year-on-year for the 20th straight month.

Related News