According to Jinshi, Japan's largest trade union, Rengo, said on Wednesday that Japanese companies have agreed to raise monthly wages by an average of 5.10% this year, the largest increase in 33 years. The organization ended its survey of companies since March. The result is seen as key to Japan's positive cycle of economic recovery. Achieving positive and sustainable growth can help policymakers put an end to deflation once and for all and bring the Bank of Japan closer to further interest rate hikes and normalization of monetary policy.
In mid-March, major companies tentatively announced that the pace of wage increases had accelerated to 5.28%, the largest increase in 33 years. The Bank of Japan then made a landmark decision to end its negative interest rate and yield curve control policies. With wage increases at large companies now a done deal, attention has now shifted to whether wage increases will spread to smaller companies that are struggling to pass on costs to improve profit margins. But income inequality in Japan remains wide.
