Japan’s Chief Cabinet Secretary, Yoshimasa Hayashi, has emphasized the importance of extending pay increases to smaller firms as part of the government’s strategy to ensure sustainable wage growth.
This focus aligns with Prime Minister Fumio Kishida’s administration’s goal to counteract rising living costs and support a fragile economic recovery.
In an interview ahead of the Bank of Japan’s (BOJ) policy meeting on July 30-31, Hayashi stressed the need for a positive economic cycle where firms can raise prices to cover higher costs and subsequently increase wages.
He indicated that the BOJ will closely consider economic conditions and market dialogue when deciding on potential interest rate adjustments.
The BOJ, having exited its long-standing policy of negative interest rates and bond yield control in March, is now anticipated to deliberate a rate hike, should wage increases become more widespread. Governor Kazuo Ueda has hinted at the bank’s willingness to raise rates if wage growth and inflation remain aligned with its 2% target.
Additionally, Hayashi mentioned the possibility of a new fiscal stimulus package later this year to support households if inflation continues to rise. While significant wage increases have been observed among large firms, there are concerns about whether smaller companies can match these hikes.
(Reuters)