Governor Ueda said this week he will be watching if wage growth can be sustained at a level that will support inflation at or above target. So far, the signs aren’t encouraging. Wage growth has fallen sharply since the year began, due to a potent combination of the reopening boost fading, a weakening push among households for wage hikes and falling corporate profits. We expect wage growth to soften further and Ueda is likely to find himself grappling with a disinflationary spiral before long.
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