Despite Shinzo Abe proudly proclaiming at the Tokyo Stock Exchange that “Abenomics will be a ‘buy’ next year as well,” Bloomberg notes surveys of economists believe his policies will fail to spark the wage increases required to outpace inflation. In fact – due to the collapsing JPY – those surveyed expect consumer prices to rise 3% next year – 5 times faster than wage growth at a mere 0.6%. Officials are concerned; Japan can’t wait one or two years for salary gains, which are needed sooner for the economy to enter a virtuous cycle of rising profits, wages and growth, Deputy Economy Minister Yasutoshi Nishimura said. But, any increase in wages depends on a pick-up in demand, not just pleas by Abe for companies to do their part for economic recovery.
Japanese employers will fail in the next fiscal year to heed Prime Minister Shinzo Abe’s goal of wage increases that outpace inflation, highlighting risks that the nation’s recovery will stall, surveys of economists show.
Labor cash earnings, the benchmark for wages, will increase 0.6 percent in the year starting April 1, according to the median forecast in a poll of 16 economists by Bloomberg News. Consumer prices will climb five times faster, increasing 3 percent, as Japan raises a sales tax for the first time since 1997, a separate Bloomberg survey shows.
The squeeze on consumers from higher prices risks undermining public support for Abenomics and dragging on retail spending, unless Abe can convince companies to boost wages to cushion the blow.
“Wage increases will be slower than the rise in prices at least until 2015, dealing a blow to Prime Minister Abe,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “It will take a while for companies to change their mind-set, which is still mired in deflation.”
Abe said today at a Tokyo Stock Exchange closing ceremony that Abenomics will be a “buy” next year as well.
The prime minister has pressed Japan Inc. to pass some of the windfall to workers through higher base pay, in meetings with business and union leaders since September. The three sides said in a joint statement this month that increased profits should be linked to wages. Japan can’t wait one or two years for salary gains, which are needed sooner for the economy to enter a virtuous cycle of rising profits, wages and growth, Deputy Economy Minister Yasutoshi Nishimura said.
Any increase in wages depends on a pick-up in demand, not just pleas by Abe for companies to do their part for economic recovery, said Kaoru Yosano, a former finance minister, in an interview in October.
Now, where’s the anti-diarrhea medicine?