Businesses in Japan urged to pay employees more
This is so that the country can complete its exit from deflation and to prevent the economy from falling into stagflation, the government said in its Annual Report on the Japanese Economy and Public Finance.
This comes at a time when the United States, Europe and others are suffering from price surges fanned by Russia’s war against Ukraine.
It was the first such paper compiled under Prime Minister Fumio Kishida, who pledges to bring about “new capitalism,” characterised by a virtuous cycle of growth and redistribution driven by investment into people.
The document underscored “the need to shift to a new system featuring sustained and stable price increases of about 2% and corresponding wage growth rates.”
“Given that the economy continues to be picking up and the rate of price increases is not significantly high, Japan is not in a state of so-called stagflation,” which involves slow growth and high inflation mixed with high unemployment, it said.
The rate of price hikes in Japan is higher than that in the recent past, but it is attributable primarily to surging import prices driven by crude oil prices, said a government official.
“To get (the country) out of deflation, it is vital that nominal wages rise in line with price increases and growth in labor productivity,” the paper said, according to Kyodo News.