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Wage growth set to remain contained

The recent strength in Japan’s wage data largely reflects a compositional shift, as more lower-paid workers have dropped out of the workforce over the past year. With vacancies still far below pre-virus levels and firms no longer reporting severe staff shortages, a genuine pick-up in wage growth is still some way off. But with the unemployment rate not far above its pre-virus low, cost pressures could eventually strengthen more sharply than we are anticipating.

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