Here's one for the Freakonomics guys: Why aren't Japan's drum-tight labor markets leading to higher wages and inflation?
When Prime Minister Shinzo Abe embarked on one of modern history's most audacious economic revival efforts, conventional wisdom held that Japan's sub-4 percent unemployment (it's now 3.3 percent) would aid the cause. Labor scarcity should in theory force Japan's cash-rich companies to raise wages, at least according to what economists call NAIRU, the non-accelerating inflation rate of unemployment. Well, 31 months into Abenomics, Japan has blown that theory all to hell.
Pay adjusted for inflation hasn't risen for 25 months, while household spending has dropped in 14 of the past 15 months, down 2 percent from a year earlier in June alone. Consumer prices excluding fresh food are essentially flat, up just 0.1 percent in June, despite the Bank of Japan's titanic stimulus program and the lowest productivity among the Group of Seven nations.