Gov't sees need to ensure sustainable wage growth in step with Bank of Japan
TOKYO (Kyodo) -- Prime Minister Fumio Kishida said Monday closer macroeconomic policy coordination is needed with the Bank of Japan as the government seeks to examine whether Japan can attain sustainable and stable wage growth and avoid sliding back into deflation.
While the outcome of this year's wage negotiations between labor unions and management is expected to be the best in three decades, Kishida said spurring wage increases remains his administration's "highest priority."
The remarks by Kishida, who has a goal of realizing both economic growth and redistribution of income, come as the BOJ also views wage growth as vital.
In its first policy guidance since Governor Kazuo Ueda became governor last month, the central bank added a specific reference to the need for pay hikes in attaining its 2 percent inflation target.
"We need to foster perceptions that Japan will not return to deflation. We will achieve an exit from deflation and sustainable economic growth led by the private sector," Kishida told a meeting of the Council on Economic and Fiscal Policy.
The key advisory panel, which includes private-sector representatitives, will follow and assess wage developments, a government official said.
During the annual "shunto" wage negotiations between labor unions and management groups, companies have agreed to raise pay by an average of 3.67 percent, according to data released last week by the Japanese Trade Union Confederation.
Japan's consumer inflation has topped the BOJ's 2 percent target for a year, largely due to higher import costs.
Ueda told the panel that the central bank will maintain monetary easing to achieve stable inflation accompanied by wage growth.
Nobuhiro Kiyotaki, an economics professor at Princeton University, said the "trauma" of deflation since the late 1990s should not prevent the BOJ from making the right policy decisions.
He argued powerful monetary easing should be removed when the inflation rate stabilizes between 1 and 2 percent, saying that the BOJ's program to keep long-term interest rates depressed is susceptible to speculators, if it persists for an extended period.
The government and BOJ have a joint accord under which the bank will implement monetary easing to achieve the 2 percent inflation target "at the earliest time possible."
Kishida and Ueda have agreed there is no immediate need to revise the decade-old document.