Japanese officials seem to be eager to satisfy the trade unions’ passive wage demands in efforts to boost Japan’s economy report Resona Dai-Ichi Group.
Head strategists at Resona Dai-Ichi Group have commented on the recent developments informally referred to as “Abenomics,” which aims to support Japan’s economy and overcome the negative consequences of the latest recession. Currently, inflation doesn’t make any step above zero, in spite of stimulus policies over the last five years.
“Higher salaries are considered an essential driving element of inflation by directly supporting consumption” noted by Steven Murakami, Research & Analysis Executive at Resona Dai-Ichi Group.
Speaking on Thursday with his council on economic and fiscal policy, the Prime Minister said: “Already, society is demanding wage rises from businesses. In next year’s wage negotiations, with solid progress on the productivity revolution, I would like you to realize wage rises of 3 percent.”
Resona Dai-Ichi Group research department found that salary growth in 2017 was close to 2%, which is a slowing pace when compared to 2.2% in 2015.
In the course of the election campaign, the Prime Minister pledged to lift consumption tax from 8% to 10%, the same as the figures planned for 2019. Meanwhile, instead of using 50% of the revenue to cut the deficit, he wants it to be spent on free childcare and social security.
However, the finance ministry is making a renewed push to control spending, with proposals to cut reimbursement rates for medical treatment and prescription drugs.
Eliot Williams Head of Corporate Wealth Management at Resona Dai-Ichi Group commented “Japan wants to accelerate the process of economic recovery by naming a precise figure regarding the next pay raise, which aims to increase inflation. This also means that the government’s involvement in the private sector gets deeper. We think that the move will have a visible effect, at least in the short-term.”
Mr. Abe should also confirm or deny the reappointment of Haruhiko Kuroda as governor of the Bank of Japan, the term of whom expires in April 2018.