Japan Press Weekly

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2022 October 19 - 25 [POLITICS]

Wage increases surpassing rising prices needed

Akahata editorial (excerpts)

The yen has been weakening in foreign exchange markets, pushing up consumer prices. The Kishida government and the Bank of Japan (BOJ) have been unable to find a way out.

The yen-dollar exchange rate in January was around 115 yen. It is about to reach 150 yen, which constitutes a key factor in the rise of import prices by 30%.

Abenomics monetary easing of a "different dimension" is to blame for the current situation. The BOJ bought out massive amounts of government bonds and increased the money supply in financial markets, guiding the yen's depreciation and ultralow interest rates in order to stimulate overseas investors to buy Japanese stocks. Combined with the injection of BOJ funds and public pension funds into the stock market, stock prices rose. Large corporations and large-asset holders benefited from surging stock prices. However, wages did not go up and the rich-poor economic gap further widened. Japan's economy has been at a standstill.

Among the major central banks in the world, only the BOJ still maintains the quantitative easing policy. The FRB and the European Central Bank already embarked on a substantial increase in interest rates as a tool to prevent a further rise in prices.

Since Japan cannot present a stable direction for financial normalization, the yen has been sold at a rapid pace in the financial marketplace. As long as Japan clings to the "different dimension" easy-money policy which keeps interest rates very low, the gap between U.S./European interest rates and Japanese rates will widen, the depreciation of yen will be accelerated, and commodity prices will keep rising. Nevertheless, both the Kishida government and the BOJ do not seem willing to give up on Abenomics.

Real wages in Japan peaked in 1997 and have since been decreasing. The National Confederation of Trade Unions (Zenroren) has suggested that an increase of 25,000 yen a month be set as a goal for the 2023 "shunto" wage-bargaining negotiations. The amount of internal reserves amassed by large corporations hit a record high of 181 trillion yen on March 31, 2022. The pressing need is for the government to establish a system to utilize a portion of corporate internal reserves for wage increases surpassing rising prices.