Fumio Kishida, the prime minister of Japan, asked companies to pursue higher wage growth starting in 2024, which is a crucial move in the country’s efforts to combat deflation and revive its economy. Speaking to the Keidanren business lobby, Kishida emphasised the need to improve household situations and increase disposable income in the face of rising living expenses by calling for “pay hikes that will exceed this year’s.”
request is made before the shunto wage discussions, which are scheduled to start in early 2024 between trade unions and management. With major businesses settling at 3.99% and smaller organisations at 3%, this year marked Japan’s best salary rises in thirty years. According to the government and the Bank of Japan (BOK), more acceleration is needed to combat inflation and advance sustainable economic growth.
Kishida’s stance was echoed by Masakazu Tokura, Chairperson of Keidanren, officially known as the Japan Business Federation, who said that in order to combat deflation, companies need to pursue pay increases “with more energy and strong determination” than before.
This is consistent with the cautiously hopeful stance of BOJ Governor Kazuo Ueda. Ueda stated that there was a “gradually rising” chance of reaching the central bank’s 2% inflation objective, albeit noting uncertainty. He went one step further and alluded to a possible change in policy should the outlook for sustainable 2% inflation stabilise. “We will likely consider changing policy if the virtuous cycle between wages and prices intensifies and the likelihood of achieving our price target in a sustainable and stable manner rises sufficiently,” stated Ueda.
Ueda observed that businesses are becoming more inclined to increase pricing and wages, which is encouraging for Japan’s economy. He did, however, stress the need for caution, saying that because of market and economic uncertainty, the BOJ has not set a deadline for changing its policy.
Lastly, he stated, according to The Japan Times, “We will carefully examine economic developments and organisations’ wage- and price-setting behaviour, and thereby decide on future monetary policy in an appropriate manner.”
