Looking for a rise

IT WAS, for the IMF, an unorthodox suggestion. Last month a report from the fund suggested that Japan should take measures to prod companies into paying higher wages. It came on the heels of an exhortation from Olivier Blanchard, a former chief economist at the IMF, and Adam Posen, another economist. They argued that in the next year the country should increase nominal wages and other benefits by 5% to 10% “by fiat”.

Wage policies have long been out of favour with economists. Their return to fashion among Japan-watchers shows just how deep concerns about the economy run. Fiscal and monetary easing has failed to stimulate consumption. Some 61% of GDP comes from private consumption, but Japanese are not spending. That is not because they reckon that entrenched deflation means things will get cheaper in the future. Rather it is because they expect to be more squeezed financially thanks to their stagnating incomes.

The IMF says wages have increased by only a paltry 0.3% since 1995. In 2015 Toyota, a carmaker, increased employees’ “base” pay by only 1.1%. The average wage increase by 219...Continue reading