Web Stories Thursday, February 29

TOKYO: Japanese policymakers searching for clues on whether wage hikes will become widespread may find relief in a central bank survey in the northern prefecture of Aomori, which showed a majority of firms planning wage hikes similar or higher than last year.

While some major companies based in big cities like Tokyo have signalled bold wage hikes, the Bank of Japan (BOJ) has said it needs to scrutinise whether pay rises will spread to smaller firms in regional areas, before raising interest rates.

But data on regional, smaller firms’ wage plans are scarce, as they tend to wait until their bigger counterparts conclude their annual wage negotiations with unions in mid-March.

Offering a rare glimpse into the wage outlook in the outskirts of Japan, a survey by the BOJ’s Aomori branch released on Wednesday showed early signs of broadening wage increases.

While 43 of the 100 firms surveyed were undecided, 78 per cent of the remainder said they expect to raise wages in fiscal 2024 at or above the pace of 2023.

The firms cited the need to boost employees morale, compensate them for rising living costs, and remain competitive in an intensifying battle to lure workers, the survey showed.

In fiscal 2023, the average pay hike in Aomori stood at 3.22 per cent, according to the BOJ. That compared with the nationwide average pay increase of 3.58 per cent for major firms last year.

The BOJ regularly collects data on the health of regional economies using its network of branches nationwide. But the data are mostly used for internal discussions and rarely disclosed.

Located at the northern tip of Japan’s main island, Aomori is typical of the numerous prefectures across the nation that has seen its population shrink as the younger generation move to big cities in search of better job opportunities.

“Labour shortage is intensifying as elderly employees are retiring en masse,” a retailer in Aomori was quoted as saying in a separate BOJ report on regional economies, adding that it was struggling to hire young workers.

In the report on regional economies, the BOJ said Japan’s wage hike momentum was building up earlier than in 2023 but the outlook remained uncertain, highlighting its cautious optimism over prospects for sustainably hitting its price goal.

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