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William Pesek

A Few More Pennies Won't Perk Up Japan

Prime Minister Shinzo Abe needs to think more boldly about how to raise wages.
The current minimum wage barely buys a beer.

The current minimum wage barely buys a beer.

Photographer: Buddhika Weerasinghe

Here's one for the Freakonomics guys: Why aren't Japan's drum-tight labor markets leading to higher wages and inflation?

When Prime Minister Shinzo Abe embarked on one of modern history's most audacious economic revival efforts, conventional wisdom held that Japan's sub-4-percent unemployment (it's now 3.3 percent) would aid the cause. Labor scarcity should in theory force Japan's cash-rich companies to raise wages, at least according to what economists call NAIRU, the non-accelerating inflation rate of unemployment. Well, 31 months into Abenomics, Japan has blown that theory all to hell.