Rising inflation and an intensifying labor crunch are prodding smaller local Japanese firms to follow their big counterparts in raising pay, a move that can generate broader wage hikes and encourage the central bank to phase out its massive stimulus.
Wages have barely risen in Japan since the asset bubble burst in the 1990s but have crept up recently, as companies face pressure to compensate employees for the rising cost of living.
Importantly, smaller firms are also starting to raise pay even as many of them face a margin crunch. A durable rise in wages is an important consideration for policymakers who seek to foster sustainable demand-driven inflation in the world's third-largest economy before starting to unwind monetary stimulus.