Japan’s Central Bank is walking a tightrope between labor shortages and inflation worries. Governor Kazuo Ueda told the Jackson Hole gathering that a “tight labor market is expected to continue to exert upward pressure on wages,” with pay increases now filtering from big firms down to smaller employers. The demographic squeeze—working-age population decline paired with rising demand for labor—has finally broken a decades-long pattern of wage stagnation, nudging the BOJ towards another rate hike by year-end (source).
- Spring wage negotiations have delivered strong hikes for three years running
- Labor mobility among younger workers is picking up
- Consumer inflation has stayed above 2% for more than three years—especially in food
Japan has a solution in mind: more women and foreign workers, a trend mirrored across developed economies.
