Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at

Consumer pain: Bank of Japan warns wage growth is lagging inflation

by James Phillipps on Nov 06, 2013 at 08:06

Consumer pain: Bank of Japan warns wage growth is lagging inflation

The Bank of Japan (BoJ) has expressed concern that wage growth is failing to keep price with rising consumer prices.

The minutes from the BoJ’s board meeting last month revealed that members are worried that if the Bank is to achieve anywhere near its 2% inflation target, real incomes will lag this figure, reducing spending power.

One member warned that significant pay rises for Japanese workers are unlikely to come through until next April when pay reviews are held ahead of the next fiscal year.

However, Capital Economics’ Julian Jessop said Japanese consumers will have to bear more strain if the government’s debt problem is to be reined in.

‘Higher inflation is the only plausible answer to Japan’s fiscal problems, but even achieving the current target of 2% may not be enough,’ he said.

‘On the basis of the international conventions used by the IMF, Japan’s gross government debt is already more than 240% of GDP. Even net debt is around 140%. Despite very low interest rates, the level of debt has been climbing as a result of weak growth and successive fiscal stimulus packages, while nominal GDP has been flat or falling as a result of persistent deflation.

‘Japan’s government debt is not yet on a hopeless path, but the risks are increasing by the year. Only small variations in the profiles for nominal GDP, the primary budget deficit or the level of interest rates would be needed to push the debt/GDP ratio substantially higher. Vary two or three of these factors together and the debt/GDP ratio could soon explode.’

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Long time coming: is the recovery here to stay?

Ian McVeigh and Steve Davies, managers of Jupiter's UK Growth fund, talk about their predictions for the UK equity space. Click here to watch a series of sponsored interviews with Jupiter's fund managers on the UK equity market.

Today's top headlines

More about this:


On the road

Click here to find out more from the Audience Development team.


Revealed: the fund stars of the future

on Apr 24, 2014 at 14:30

Sorry, this link is not
quite ready yet