BOJ sees wage growth spreading to regional firms

The Bank of Japan (BOJ) was cautiously optimistic on Monday, as wage hikes spread to smaller regional companies due to labour shortages. This could boost confidence in hitting the two per cent inflation target.

The BOJ’s summary of its quarterly regional branch manager meeting revealed that many regions are witnessing a rise in companies, particularly in the service industry, passing on rising costs to consumers or considering doing so.

The summary noted that “big firms’ big pay hikes in this year’s wage negotiations were spreading to small and medium-sized companies.” Notably, some smaller regional firms are prioritizing wage increases to retain and attract workers, even if it strains their profits.

The BOJ considers wage growth a crucial factor in achieving its inflation target. The central bank’s board will closely examine wage developments when deciding on potential interest rate hikes at its upcoming policy meeting on July 30-31.

Attribution: Reuters