BOJ Expects Tight Labor Market to Put Pressure on Wages

Bank of Japan Governor Kazuo Ueda said he expects Japan’s tight labor market to keep upward pressure on wages, reflecting his view that stable inflation is taking hold.

The BOJ has identified Japan’s labor shortage as a key driver of inflation via wage growth. (Photo: Kakidai, Wikimedia Commons) 

“Wage growth is spreading from large enterprises to small and medium enterprises,” Ueda said Saturday at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, Japan Times reported.

“Barring a major negative demand shock, the labor market is expected to remain tight and continue to exert upward pressure on wages,” he added.

His comments are likely to reinforce growing market speculation of another interest rate hike this year, although he did not directly discuss monetary policy.

The BOJ has identified Japan’s labor shortage as a key driver of inflation via wage growth. Bets on another hike had already been rising in recent weeks, fueled by strong price pressures and steady economic growth.

Earlier this month, U.S. Treasury Secretary Scott Bessent unusually suggested the BOJ was mishandling its inflation fight, saying in a Bloomberg TV interview that “they’re behind the curve.”

Data released Friday showed consumer prices excluding fresh food rose 3.1% year-on-year in July, above economists’ forecasts and well above the BOJ’s 2% target, even as price growth moderated.

The Jackson Hole conference this year focused on labor market dynamics. Ueda noted that expanding women’s participation in full-time jobs could help ease labor shortages caused by Japan’s aging population and low birth rate.

Currently, only about 50% of women in employment are full-time workers, compared with around 80% for men.