Bank of Japan officials figure that average base wage gains of 1 percent are needed in the coming fiscal year to sustain the economy’s emergence from two decades of stagnation, say sources familiar with central bank’s discussions.
Such a bump would be double the estimated rise of base wages for fiscal 2014.
As the slide in oil prices depresses consumer prices, higher pay will be critical to keep BOJ Gov. Haruhiko Kuroda’s reflation campaign going. And income gains are needed to sustain consumer spending power, the sources said, asking not to be named as the talks are private.
Any failure by employers to respond to pressure from policymakers to boost pay would make it less likely the BOJ will meet its 2 percent inflation target, putting pressure on the bank to add monetary stimulus. The median estimate of economists surveyed by Bloomberg is for a base pay rise of just 0.6 percent next fiscal year.
“The BOJ will probably be forced to bolster stimulus if wages don’t rise next fiscal year,” said Yasuhide Yajima, an economist at NLI Research Institute. “Even if base pay increases 1 percent, it’s not clear if the BOJ can achieve the inflation target because 2 percent is extremely ambitious.”
Prime Minister Shinzo Abe has held regular meetings with business and labor chiefs to try to orchestrate pay increases to sustain a revival in the economy.
Business and labor leaders struck an agreement to boost base pay by 0.4 percent this fiscal year following negotiations last spring, according to Rengo, Japan’s biggest trade union.
Base salaries fell every year before that, except fiscal 2005, back to 1999, according to the labor ministry.
Companies, on track for record profits this fiscal year, have increased bonuses, helping support incomes. Winter bonuses rose 5.3 percent on average, said a survey by Keidanren, the nation’s biggest business lobby, but that was at large companies, which only account for a fraction of workers.
Consumer prices rose 2.4 percent in November from a year earlier, boosted by the consumption tax increase in April and higher costs driven by the BOJ’s stimulus.
Abe said Wednesday he wants wage hikes to catch up with inflation in about two years.
Kuroda told Keidanren last month that he has “strong interest” in this spring’s wage talks between executives and labor leaders.
Some officials think the BOJ should avoid focusing too much on wage negotiations, which are outside the realm of monetary policy, the sources say.
Rengo said Dec. 2 its members will seek an increase of 2 percent or more in base wages. Abe secured an agreement from Keidanren on Dec. 16 to call on companies to do their utmost to boost pay next fiscal year.
Toyota Motor Corp.’s labor union will seek an increase of more than ¥6,000 in monthly base wages, more than the previous gain of ¥2,700, as the automaker predicts a record profit, Nikkei news agency said.