TOKYO, Aug 20 (Reuters) – Japan’s dwindling working-age
population is leading to structural changes in the labour market
that are heightening pressure on firms to hike wages and
services prices, the Bank of Japan said in two research papers
released on Tuesday.
The findings back up the central bank’s argument that
broadening inflationary pressures warrant raising interest rates
steadily from current near-zero levels.
Permanent workers’ pay remained stagnant even as labour
shortages intensified since the mid-2010s, as female and elderly
workers filled the gap by taking on low-paid, part-time jobs.
The trend is changing as a dwindling pool of female and
elderly workers, rising job hoppers and an increase in pay for
part-time jobs prod firms to hike permanent workers’ pay, the
BOJ said in a research paper on Japan’s labour market.
“Labour shortages are triggering changes in companies’
wage-setting behaviour,” the paper said. “Scope for additional
labour supply is likely to gradually shrink, which is seen
keeping upward pressure on wages.”
Such wage pressure is beginning to replace raw material
costs as the main driver of inflation, the BOJ said in another
research paper on Japan’s service-sector prices.
Services ranging from English lessons to tuition to massage
have seen prices rise as labour costs continue to increase, the
paper said.
“With wage pressure heightening, companies’ price-setting
behaviour is changing” and propping up service-sector prices,
which had hovered around zero since the late 1990s, it said.
The BOJ ended negative interest rates in March and hiked
short-term borrowing costs to 0.25% in July on the view a solid
economic recovery will keep inflation durably at its 2% target.
BOJ Governor Kazuo Ueda has said the central bank will keep
raising interest rates if economic growth and inflation move in
line with its projections.
(Reporting by Leika Kihara; Editing by Kim Coghill)
