My subscription
...
Filters
My Subscription All Publications

PM Kishida’s plans to raise wages sound familiar

PM Kishida’s plans to lift wage growth largely follow the Abenomics blueprint of tax incentives, targeted pay hikes in sectors facing severe labour shortages and rapid minimum wage hikes. A tax on corporate cash holdings would be a novelty, but we suspect that firms would respond by diverting their cash into other financial assets or raising dividend payouts rather than by lifting wages. Unfortunately, Kishida is showing little appetite for putting his money where his mouth is by providing generous across-the-board pay hikes for public sector workers.
Tom Learmouth Japan Economist
Continue reading

More from Japan

Japan Economics Update

The implications of an escalating Taiwan crisis

The extent to which neighbouring countries would be affected by an escalation of tensions between China and Taiwan would depend both on which sides they take and on the nature of restrictions imposed by the West and China. ASEAN countries are most reliant on China both as a source of imported inputs as well as a destination for exports, while major disruptions to semiconductor production in Taiwan would severely restrain Japan’s manufacturing industry despite its smaller trade links with China.

10 August 2022

Japan Chart Book

Output will return to pre-virus trend eventually

With a record virus wave sweeping across the country and consumer confidence slumping, we’re slashing our forecast for Q3 consumption growth from 0.8% to 0.2%. While the government has refrained from declaring another state of emergency, spending was weakening even before virus cases started to surge. That means that GDP will remain much weaker in the near term than the pre-pandemic trend, forcing the Bank of Japan to keep policy loose even as central banks elsewhere are tightening the screws. However, we still expect that gap to close eventually, for two reasons. First, while the long-running rise in the labour force participation rate stalled over the last couple of years, the share of the population available for paid employment is now on the rise again. What’s more, mobility has recently reached pre-virus levels for the first time since the start of the pandemic, which suggests that households are learning to live with the virus even if currently they are not spending as before. The still very high household savings rate should fall in earnest before long.

8 August 2022

Japan Economics Weekly

The rise and fall of Japan's energy imports

Japan is still struggling to wean itself off fossil fuels despite a new government push to boost solar power. However, the country has become more energy efficient over the past decade, which has helped the economy weather the impact of rising global energy prices. Meanwhile, the government has recommended a 3.3% rise in the minimum wage, the largest move on record. While overall wage growth would get a boost over the next year, we think it would still remain well below the 3.0% level the BoJ maintains is needed to sustain inflation above its 2.0% target  

5 August 2022

More from Tom Learmouth

Japan Economics Weekly

Services recovering, industry still ailing

This week’s activity data provided further evidence that supply shortages in the car sector are holding back the recovery. We expect car production to rebound this quarter as factories in Southeast Asia are reopening, but lingering chip shortages will remain a drag. As such, the onus rests on the services sector to drive the recovery for now, which is being supported by the end of curfews at bars & restaurants and should soon get an additional shot in the arm by the resumption of the Go To Travel campaign.

29 October 2021

Japan Data Response

Labour Market & Industrial Production (Sep. 2021)

While employment fell sharply again in September it should rise strongly across Q4 as economic activity gets back to near normal now that most restrictions have been lifted. Meanwhile, the sharp fall in industrial production due to a plunge in car production in September suggests that GDP may have contracted in Q3, though manufacturing output is set to rebound strongly in Q4.

29 October 2021

Japan Economics Update

Policy tightening still a distant prospect

The Bank of Japan shocked no one in keeping its interest rate targets unchanged today, a status quo we think will last for years. The Bank also revised down its growth forecasts for the current fiscal year and signalled that policy will have to remain loose for a prolonged period.

28 October 2021
↑ Back to top