BOJ's wage caution could have little impact on companies' decisions - Stokes

 

There are more reactions to the central bank's caution to private sector firms to temper massive increases in wages.

 

Development economist Dr. Nelson "Chris" Stokes says the BOJ's warning may have little impact on wage decisions for private firms. 

 

"Firms will act in a way that is in their interest. So if it is in their interest to pay this guy a 20% wage increase because that is going to deliver more value to the company, I do not think that they're going to stop and say, oh, you know, the governor is suggesting six to seven, maybe we shouldn't do that. That's just not the way the free market works and not the way that firms make decisions," he argued.

 

Dr. Stokes suggested that companies have the upper hand in the current labour market. But he acknowledged that this could change as unemployment rates get lower or where certain skills become more scarce. 

 

Financial expert Keisha Bailey urged firms not to use what the central bank has said as an excuse to not increase salaries. 

 

"The BOJ Governor's sentiment should not be used as an excuse to not grant wage increases because the comments were not to have zero, but he had said specifically, it is hoped that there is no substantial increase. The keyword being 'substantial' and not none."

    

On Monday, BOJ Governor Richard Byles said companies should be mindful of high wage increases, as this may have a negative effect on inflation.

 

The BOJ advised that increases within the current inflation band would have less material impact.

 

Mr. Byles also said if large wage adjustments are accompanied by increased productivity, the impact on inflation would be negligible.