TOKYO : Japan's big companies are expected to deliver the largest pay rise in 26 years in next week's"shunto" wage negotiations, offering policymakers hope the country might finally emerge from its deflationary doldrums.
It will also test Prime Minister Fumio Kishida's flagship"new capitalism" policy that aims to more widely distribute wealth among households by prodding firms to hike pay. Big firms will offer on average pay rises of 2.85 per cent for the financial year beginning in April, which would be the fastest pace of increase since 1997, a survey by the Japan Economic Research Center showed in January.
Some analysts doubt whether smaller firms at the end of the supply chain can follow suit, as stubbornly high raw material costs erode their margin. "Certainly, wages are expected to swing upward considerably in this year's spring wage talks, but this will be very transitory," said former BOJ board member Takahide Kiuchi, who is now executive economist at Nomura Research Institute.
Uncertainty over the sustainability of wage hikes could prod the BOJ to go slow in dialing back stimulus, some analysts say.
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