The BOJ report revealed a trend of wage increases, sources say By Reuters
Written by Leika Kihara
TOKYO (Reuters) – The Bank of Japan will highlight how wage increases extend to all companies, including small firms, in a report later this month, sources familiar with its thinking said, in a move that helps to keep the case short-term. rising interest rates.
The findings, which will be included in an appendix to a regular, quarterly report analyzing Japan’s regional economy, will be based on research and hearings conducted by the national central bank’s branch offices.
Both the main report and the annex are likely to highlight how a growing number of small and medium-sized firms are raising wages, three sources said, a sign of the wage expansion necessary for interest rate hikes.
The results will be among the items the BOJ will consider at its next policy-setting meeting on July 30-31, when the board will issue new quarterly growth and inflation forecasts.
The BOJ’s regional report will be released on Monday, when its branch managers hold a quarterly meeting in Tokyo. The annex is likely to be issued later, sources said.
The BOJ ended eight years of negative interest rates in March on the idea that rising wages could keep inflation steady around its 2% inflation target. Core consumer prices rose 2.5% in May from a year earlier, staying above the BOJ’s target for more than two years.
BOJ Governor Kazuo Ueda has hinted at the possibility of more rate hikes if wage increases are extended and companies encourage them to raise prices, thereby pushing inflation to 2%.
Many market players expect the BOJ to raise interest rates from current levels of near zero this year, although they are divided on whether it will happen this month or later.
A survey released Wednesday by Japan’s largest trade union Rengo showed companies promising to raise wages by an average of 5.10%, the biggest increase in three decades, this year.
But the pay increase for smaller companies, at 4.45%, was less than the 5.19% increase offered by their larger counterparts. There is uncertainty as to whether very small firms, not included in Rengo’s survey, will be able to raise wages.
The BOJ’s network of branches, where officials talk to local business managers on a regular basis, allows the central bank to track whether wage increases are growing among small, regional firms.
About 70% of Japan’s workforce is employed by small and medium-sized enterprises (SMEs), making their wages key to judging whether inflation will reach the BOJ’s 2% target.
