TOKYO (Reuters): Japanese Prime Minister Fumio Kishida said on Tuesday his government would do “everything possible” to achieve real income growth to put a decisive end to deflation.
“The biggest mission for my administration is to revive the economy,” Kishida told the lower house plenary in a policy speech marking the start of the regular parliament sessions.
“The economy, particularly wage hikes, is an urgent issue.”
While he did not announce any new policies, the premier stressed the need to regain public trust in politics amid a funding scandal that has sent support for his ruling Liberal Democratic Party (LDP) to its lowest in more than a decade.
Achieving sustainable wage growth and stable inflation is a focus of this year’s spring wage talks between employers and workers and could pave the way for the Bank of Japan to depart from its unconventional monetary stimulus.
Last year, Japan’s blue chip firms offered a 3.6% wage hike, the highest in three decades, and economists now expect 2024 wage hikes could beat that at nearly 3.9%, reflecting a labour crunch and corporate cash pile of 343 trillion yen ($2.33 trillion).
However, small firms, which employ seven out of 10 workers, lag their larger peers in offering generous wage hikes.
Analysts are watching to see if there is any correlation between the end of deflation and the timing of the BOJ’s policy change.
While Japan’s economy is no longer in deflation, risks that price declines return have prevented authorities from declaring a decisive end to deflation.
Kishida said his administration has lifted minimum wages and sought to raise pay for public-sector workers in medical and welfare services as well as truck drivers, and the class of non-regular workers including part-timers and contract workers.
The premier said on top of wage hikes, temporary cuts in income and resident taxes of 40,000 yen ($269.96) per individual would be available from June, boosting disposable income.
“By achieving rises in wages and disposable income through public and private-sector coordination, we will build a positive mindset in society that it’s natural for wages to rise,” he added.
Kishida and Finance Minister Shunichi Suzuki both stressed the need to tackle fiscal reform.
“Japan’s fiscal situation will become even more severe due to several rounds of extra stimulus budgets in response to the COVID-19 pandemic and rising inflation,” Suzuki told parliament.
He referred to planned issuance of government bonds (JGBs) of around 182 trillion yen for the fiscal year ending March 2025.
“We must secure market confidence in Japan’s fiscal sustainability by tackling fiscal reform in the medium to long term,” Suzuki said. “We will press ahead with expenditure and revenue reform with the aim of the primary budget surplus in fiscal 2025 by normalising spending structure.”
