Bank of Japan Governor Haruhiko Kuroda on Monday called on companies to raise wages in line with the central bank’s efforts to achieve 2% inflation, saying a suitable environment has already been established.
Speaking at a meeting of business leaders in Nagoya, Kuroda said, “In our view, the environment for wage increases—such as a tight labor market and high corporate profits—is certainly already well established.”
“However, it is of course up to firms’ management and labor whether to raise wages in line with the 2% inflation benchmark in anticipation of price increases of 2% as we move on,” Kuroda said.
He said the BOJ has “the capability” and the “strong will” to achieve the inflation target at the earliest possible time, adding that the bank will adjust monetary policy “without hesitation” if judged as necessary to that end.
Kuroda said given that Japan’s economy is on the road to overcoming deflation, raising wages and increasing fixed investment are necessary not only for Japan’s economy as a whole but for companies themselves. “Taking action now is a prerequisite for firms to be among the winners in the future,” he said.
On the current state of price movements, Kuroda said, “Once the effect of the decline in energy prices is excluded, the underlying trend in inflation has steadily improved.”
In October, Japan’s consumer prices fell 0.1% from a year earlier, down for the third straight month. But excluding food and energy prices, the index climbed 0.7%, according to government data released Friday.
As a risk factor, Kuroda said that increased uncertainties over the course of emerging economies could undermine business confidence in Japan and possibly lead firms to scale down investment and wage increases. Such a possibility warrants attention, he added.