Japan manufacturers want a stable yen, top companies agree to 5.58pc average pay hike

Japan manufacturers want a stable yen, top companies agree to 5.58pc average pay hike


Progress on wages is a product of 'shunto' or 'spring labour offensive'

  • Roughly 70pc say in a BOJ survey they experienced drawbacks from monetary easing measures including a weak yen which pushed up import costs
  • Many note they are no longer able to hire enough workers if wage growth is kept low
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TOKYO (Reuters) – Japan's large manufacturers saw exchange rate stability as the biggest factor they wanted out of the central bank's monetary policy, a Bank of Japan survey showed on Monday.

Roughly 70 per cent of firms polled said they experienced drawbacks from the BOJ's 25-year-long monetary easing measures including a weak yen that pushed up import costs, the survey showed.

About 90pc of the total also saw benefits from the BOJ's prolonged easing such as low borrowing costs, the poll showed.

The survey, conducted on roughly 2,500 firms nationwide, highlights the importance Japanese firms place on yen moves in assessing the impact of monetary policy.

Many firms surveyed also said they were no longer able to hire enough workers if they kept wage growth low, and saw an economy where wages and inflation rose in tandem as more favourable than one where wages and prices barely moved.

"Japan is on the cusp of seeing big changes in corporate behaviour," the BOJ said in the survey conducted as part of a long-term review of the pros and cons of its past monetary easing steps.

About 90pc of firms said they were more willing to hike wages largely to address labour shortages, while over 80pc said they found it easier than before to hike prices, the survey showed.

The findings underscore the BOJ's view that rising wages and prices will keep inflation sustainably around its 2pc target, and allow it to raise Japanese interest rates from current near-zero levels.

The BOJ ended eight years of negative interest rates and other remnants of its radical monetary stimulus in March, making a historical shift away from decades of ultra-loose policy.

But the decision failed to reverse the yen's declines that have hurt domestic consumption by pushing up imported goods prices, as markets focused on the still-large interest rate divergence between Japan and the United States.

The long-term review was launched by BOJ Governor Kazuo Ueda in April last year, and looks into the benefits and drawbacks of the unconventional easing tools the central bank used during its 25-year battle with deflation.

While the BOJ has said the review won't have a direct impact on future monetary policy, analysts say the discussions could offer clues on how soon the central bank would raise rates again and reduce its huge bond purchases.

Monday's survey, which was part of the review, polled companies on how they saw their business activities affected by the central bank's monetary easing measures since the mid-1990s.

The BOJ will also hold on Tuesday a second workshop where its officials and academics discuss the impact of past monetary easing steps on the economy and prices.


Top Japanese companies agreed to wage hikes of an average 5.58pc at annual labour talks that wrapped up in March, the Keidanren business lobby's preliminary data showed on Monday, representing the heftiest pay hike in 33 years.

The average wage increase at the "shunto" spring wage talks this year exceeded last year's finalised 3.99pc increase and came close to the 5.6pc recorded in 1991.

The rising wages reflect Japan's chronic labour shortages, as well as efforts to help employees tackle rising consumer prices.

The annual pay negotiations – called "shunto" or "spring labour offensive" – are one of the defining features of Japanese business, where relations between labour and management tend to be more collaborative than in some other countries.

The country's largest union group Rengo has said that Japanese firms had agreed to raise pay by 5.17pc this year, the biggest rise under comparable data since 2013.

Keidanren's survey covers 244 large companies with 500 employees or more in 22 sectors. The preliminary data was derived from 89 companies in 16 sectors. Final data will be published in late July.