Weekend Economists Stamp Out Ignorance December 27-29, 2013

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27. Japan Wages Pressured by Fastest Inflation Since 2008

http://www.bloomberg.com/news/2013-12-26/japan-consumer-price-gains-pass-halfway-point-to-inflation-goal.html

Japan’s inflation accelerated to the fastest pace since 2008 last month, bringing the rate closer to policy makers’ target while threatening to erode household spending power unless employers boost wages.

Prices excluding fresh food rose 1.2 percent from a year earlier, the statistics bureau said today in Tokyo, more than a median forecast of 1.1 percent in a Bloomberg News survey of economists. A separate report showed industrial output rose 0.1 percent from October, less than forecast, in a risk for projections of an acceleration in economic growth this quarter.

Today’s data raise the stakes for employers girding for annual wage negotiations, with Prime Minister Shinzo Abe calling on them to boost salaries by more than the increase in the cost of living. Separate figures showed signs of a pickup in the labor market, with one job for every applicant -- the most since 2007.

“The rate of price rises will allow the unions to push for higher wages,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo and a former central bank official. At the same time, “they may temper their demands because of concerns about keeping jobs -- so it’s difficult to see meaningful wage hikes.”