BOJ Governor Wants Companies to Raise Wages

The Bank of Japan’s current aggressive monetary easing should provide a basis for companies to set wages as the country struggles to completely exit chronic deflation, BOJ Governor Haruhiko Kuroda told a meeting of economists and central bankers this weekend.

In his speech at an annual conference in Jackson Hole, Wyoming, on Saturday, Kuroda said Japan faces “a troublesome problem” in which wages for regular workers do not reflect labor market conditions sufficiently in the short term, according to the script of his speech released by the BOJ.

A proper mechanism for negotiating wage hikes annually stopped functioning as the prolonged deflation forced companies to cut costs, while workers accepted falling wages in exchange for job security, Kuroda said during the symposium, held by the Federal Reserve Bank of Kansas City.

But the BOJ chief also said that this year, more companies raised base wages as well as bonuses in response to government prompting. The BOJ wants to underpin and accelerate that trend, he added.

The Japanese central bank has provided ample liquidity to the economy through asset purchases from banks, while aiming to achieve its 2 percent inflation goal in or around fiscal 2015, which starts next April, under what it calls “quantitative and qualitative easing.”

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza