Japan Government Calls for Wage Increases

Japan's chief cabinet secretary, Yoshimasa Hayashi, emphasized the need for broader pay hikes among smaller firms to bolster the country's fragile economic recovery amid rising living costs. This push for sustained wage increases aligns with Prime Minister Fumio Kishida's administration's goal to prevent inflation from undermining consumption. Hayashi's comments come ahead of the Bank of Japan's (BOJ) policy meeting on July 30-31, where the potential for raising near-zero interest rates will be discussed. He highlighted the importance of creating a 'positive' cycle where companies can pass on higher costs through price increases, enabling them to maintain wage growth. The BOJ has shifted away from its long-standing negative interest rate policy, and Governor Kazuo Ueda has indicated readiness to hike rates if wage increases become widespread. Additionally, the government is considering a new fiscal stimulus package to support households if inflation persists, suggesting a proactive approach to economic stability.