By Leika Kihara
TOKYO (Reuters) – The Bank of Japan (BOJ) said on Monday that wage hikes are spreading to smaller companies in regional areas as they scramble to retain or hire workers, signaling confidence that pay hikes will keep inflation durably around its 2% target.
Many regions in Japan are seeing more companies pass on rising costs, or consider doing so, particularly those in the services industry, the BOJ said in a summary of discussions at its quarterly meeting of regional branch managers.
“Many regions reported that big firms’ big pay hikes in this year’s wage negotiations were spreading to small and medium-sized companies,” the summary said.
Some regional smaller firms decided to prioritise raising pay to retain or hire workers, even if they were not earning sufficient profits to make up for the higher cost, it said.
The BOJ said consumption was “firm as a whole,” with robust spending by inbound tourists making up for soft consumption among households hit by rising living costs.
The central bank’s view on wage developments will be among key factors its board will scrutinise in deciding whether to raise interest rates at its next policy meeting on July 30-31.
(Reporting by Leika Kihara; Editing by Kim Coghill and Sam Holmes)
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