Labor-management wage talks conclude in Japan
The Bank of Japan (BOJ) announced that Japan’s inflation rate is set to reach 2% today, potentially signaling the end of negative interest rates.
Japan’s largest trading union, Rengo, claims that Japan’s average wage hike demand has reached 5.85%, the highest figure in 30 years. There is speculation that due to this, the BOJ will ease back stimulus of Japan’s economy. Japan has escaped the threat of a recession but remains vulnerable within the region.
Nominally ranked as the 4th economy in the world, Japan’s economy has stalled under US pressure to curtail China’s growth. A US push to widen curbs against Chinese microchips is impacting Japanese exports of crucial chipmaking equipment and chemicals to China, thereby reducing Japanese net exports. Japan’s measures, restricting exports of 23 types of chipmaking equipment, fail to explicitly mention China. Given Japan’s economic struggles and a lack of demand for semiconductors domestically, the country is caught between diplomacy and economic outlook.
The BOJ is expected to engage in policy to ease back stimulus because of a rebounding economy. Short term, the Yen may appreciate compared to the Dollar. However, if wages fail to rise, consumption may fall and cause further economic decline. This may cause Japan to lean on Chinese trade more heavily in the long term, as the two nations seek to define the nature of their relationship. Additionally, US-Japan relations may suffer if Japan-China economic interdependence continues to grow.
