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.”