Stingy Pay Raises Pull the Handbrake on Japan’s Inflation Drive
- This is a sharp contrast to U.S., where wage hikes are likely
- Poor salary gains may crimp inflation in economies like Japan
Morning commuters make their way to work in the central business district of Tokyo, Japan, on Friday, Dec. 25, 2009. Japan's unemployment rate rose for the first time in four months in November, an indication job growth may not be strong enough to support the economy's recovery from its deepest postwar recession.
Photographer: Tomohiro Ohsumi/BloombergAs the world puts the worst of the disinflationary threat behind it, tepid wage growth is shaping up as a key restraint to a genuine reflationary era taking hold in some economies. Nowhere is this more so than Japan.
Unlike the U.S. and Germany, where higher prices are driving up salary expectations, there is little pressure for pay hikes in Japan. The risk is that nascent inflation -- forecast to emerge this year on the back of resurgent oil prices and a weak yen -- erodes households’ purchasing power and crimps consumer spending.