Economic news

BOJ sees chance wages, inflation could overshoot

2024.08.01 02:21

By Leika Kihara

TOKYO (Reuters) -The Bank of Japan said on Thursday there was a chance wage and price growth could overshoot expectations as labour markets tighten.

In a full version of its quarterly outlook report, the central bank also said service-sector firms were becoming more keen to pass on rising labour costs through price increases.

“There is a possibility that wage growth and inflation may overshoot, accompanied by heightening medium- and long-term inflation expectations, amid a tight job market,” the BOJ said in the report.

Japanese firms typically review prices for their services in April, which is the start of a new fiscal year, and October.

In April, an increasing number of service-sector firms raised prices to make up for higher labour costs, the BOJ said.

The key would be whether such changes in price-setting behaviour broaden among service-sector firms in October, and whether the moves will be sustained, it said.

© Reuters. FILE PHOTO: Japanese national flag is hoisted atop the headquarters of Bank of Japan in Tokyo, Japan September 20, 2023.  REUTERS/Issei Kato/File Photo

The BOJ raised interest rates on Wednesday, taking another step towards phasing out its radical stimulus due to a growing conviction that Japan is making progress towards durably achieving its 2% inflation target.

In a summary of the outlook report released on Wednesday, the BOJ maintained its projection from April that inflation would stay around its 2% target in coming years.



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