TOKYO (AP) — Japan’s central bank governor is urging companies to raise wages and investment to aid the country’s efforts to overcome deflation.
Haruhiko Kuroda told a group of businessmen in central Japan on Tuesday that the central bank was committed to achieving a target of 2 per cent inflation and that he expects companies to make their decisions based on that plan.
Kuroda announced last month an expansion of the central bank’s asset purchases, to inject trillions more yen into the economy, Japan slipped into recession last quarter, raising doubts over the stimulus-led strategy for restoring sustainable growth championed by Prime Minister Shinzo Abe.
Profits of Japanese corporations have soared thanks to the central bank’s monetary expansion, which has weakened the yen. But wages for many workers have remained flat or even fallen, while prices have risen.
Weak purchasing power is seen as one reason why consumer demand has fallen and remained weak after a sales tax hike in April, from 5 per cent to 8 per cent. After more than two decades of stagnation, many Japanese households have meager savings and little leeway in their spending.
“I have great interest in developments in wages and price settings through spring of next year,” Kuroda told the business people in Nagoya, the heart of Japan’s auto and aviation industries.
Last week, Abe postponed a planned tax hike for next year, putting it off to 2017 and calling an election to seek a renewed mandate for his policies. The delay in the tax hike is widely seen in Japan as backtracking on Abe’s pledges to do more to reduce the government debt, which is more than twice the size of the economy.