Prime Minister Fumio Kishida is counting on companies to raise wages to accelerate wealth redistribution, the centerpiece of his push for a new form of capitalism, but his plan faces multiple hurdles heading into 2022.
Companies will need to not only factor in a recovery in their earnings from the COVID-19 pandemic but also heftier energy and material costs and the unknown impact of the omicron variant when annual shuntō labor-management wage negotiations begin in the spring.
Wage growth is critical for consumers to step up spending and rejuvenate the world's third-largest economy, analysts say. Increased consumption should make companies feel more comfortable about raising prices and help the Bank of Japan as it struggles to fire up inflation toward its elusive 2% target.