Will the Bank of Japan finally start moving on the 19th!
Explanation for those who don't really understand wage increases, negative interest rates, Bank of Japan meetings...!
🔵 Getting started
・The 2024 Spring Battle saw wage increases significantly higher than the previous year.
・This is due to high corporate profit margins and labor shortages.
・As a result of this, there is a growing possibility that the Bank of Japan will consider canceling negative interest rates.
🔵 Characteristics of the 2024 Spring Battle
✔ ︎ High level of wage increases
・According to the coalition's aggregated results on the centralized response day, the wage increase rate was 5.28%, which was above 3.80% at the same time last year, and reached a high level for the first time in 33 years since 1991.
・High levels of wage increases have been realized, mainly by major companies, with Toyota Motor Corporation responding at full price for 4 consecutive years, and Nippon Steel increased by 11.8%.
✔ ︎ Spread to small and medium-sized enterprises
・The focus is on the spread to small and medium-sized enterprises. Small and medium-sized enterprises account for about 70% of employment, and how far the momentum of wage increases spreads is important.
・The government has a policy of promoting the spread of wage increases by taking support measures for small and medium-sized enterprises.
✔ ︎ Response to rising prices
・Prices will continue to rise in 2024, and there are concerns that life will become more difficult.
・Wage increases play an important role in protecting livelihoods by compensating for negative real wages due to rising prices.
✔ ︎ Negative interest rate cancellation
・Higher wage increases are likely to accelerate expectations that the Bank of Japan will lift negative interest rates.
・The Bank of Japan says it will continue its monetary easing policy to achieve an inflation rate of 2%, but progress in wage increases may reduce the need for this.
・Market participants anticipate negative interest rates being lifted at monetary policy meetings in March or April.
🔵 Quantitative monetary easing
・There is a possibility that the Bank of Japan has abolished YCC (yield curve control) and is considering a new quantitative monetary policy framework.
・There is also a possibility that government bond purchases will be reduced and quantitative tightening will begin.
・However, a drastic reduction in government bond purchases will have a signal effect, and the hurdles will not be low.
🔵 Impact on the Japanese economy
✔ ︎ Economic Growth
· Wage increases may lead to an increase in private consumption and promote economic growth.
・However, if prices continue to rise, real wage growth will be limited, and there is a possibility that the effect on economic growth will decline.
🔵 Company performance
・Increased labor costs may put pressure on corporate performance.
・However, there is also a possibility that adverse effects on corporate performance can be suppressed by improving productivity and passing on prices.
🔵 Issues and Initiatives
✔ ︎ Spread to small and medium-sized enterprises
・The spread of wage increases to small and medium-sized enterprises is an issue. The government needs to promote the spread by taking support measures.
✔ ︎ Response to rising prices
・If prices continue to rise, real wage growth will be limited, and the burden on people's lives will increase. The government needs to step up measures against price increases.
🔵 Conclusions
・The 2024 Spring Battle achieved a high level of wage increases and was an important achievement for the Japanese economy. In the future, efforts aimed at overcoming issues, such as the spread to small and medium-sized enterprises and response to rising prices, will be important.
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