Initial wage awards by big firms heartens BOJ – MNI

The initial wage hikes at major firms are cheered by the Bank of Japan (BOJ) officials but they remain skeptical if higher wages will filter to smaller firms, MNI reports, citing people familiar with the BOJ thinking.

Key takeaways

“Now the focus for the BOJ is whether wages hikes at smaller firms go above the 1.86% level seen in 2021, which was the first time in eight years that wages fell below 2%. Higher wages are vital for the BOJ’s target of stable 2% inflation and to trigger a virtuous economic cycle.”

“The BOJ estimates household “forced savings” of JPY20 trillion on a cumulative basis for 2020 (excluding the amount of special cash payments put aside for savings), for around 7% of potential disposable income that were used as some lockdown conditions were eased in the fourth quarter.”

“The BOJ said when new restrictions are lifted this year, spending from these funds may again be used, but not have the same potential impact as other prices have gained.

The BOJ is scheduled to announce its latest policy decision on Friday.

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