Wage growth is the key to escaping deflation and realizing the promise of Abenomics, according to regional economy minister Kozo Yamamoto, a recent appointee to Prime Minister Shinzo Abe’s cabinet.
"If you consistently raise wages every year, people will start to consume and invest," he said in an interview with Bloomberg News on Aug. 26. Yamamoto stressed the importance of stable wage growth in reflating Japan’s economy, saying that that if wages do not increase by at least two percent per year, it would be difficult for the Bank of Japan to reach its two percent inflation target.
Even with record company profits in recent years, wage growth has been stagnant, undercutting consumption and economic expansion. With consumer prices falling again even after more than three years of massive monetary stimulus, more analysts are calling for the government to boost pay.
Although some progress has been made in minimum wages in percentage terms, hourly wages still start at a meager 823 yen ($8.07).
Yamamoto said that the government should consider a wage-target policy at his first press conference after joining the cabinet.
"We say an inflation target, but the core of it is wages in the end," he said in last week’s interview. "If you don’t raise wages, CPI won’t increase at all."
Yamamoto also expressed his desire to work with newly-elected Tokyo Governor Yuriko Koike in using Japan’s special economic zones to help the capital city flourish, noting they are scheduled to meet with hedge fund investors from the U.S. soon. "Whether it’s tackling existing issues or addressing new ones, I want to work together closely." he said.