The government’s new plan to offer firms more generous tax deductions for raising wages is unlikely to lift wage growth to 3% as targeted by PM Kishida. But with smaller firms being offered corporate tax credits as high as 40%, we think the new measures may entice some firms into bigger wage hikes against a backdrop of tougher hiring conditions over the next few years. Meanwhile, renewed supply chain disruption in Vietnam – where daily cases are back at record highs – is a downside risk to our upbeat outlook for Japanese car production.
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