Bank of Japan Governor Haruhiko Kuroda is finally getting a pay raise — and so, too, are a growing number of workers throughout the industrial world.
Wages are beginning to climb in the US, Japan, the UK and Germany as tightening job markets force employers to pay workers more. That is good news for households already benefiting from a steep fall in oil prices.
The raises are not big — Kuroda, for example, is getting a 1.3 percent bump — and labor has a long way to go to get back to where it was before the US recession hit at the end of 2007. Yet the increases are a welcome sign for policymakers that the world economy is on the mend and primed for potentially faster growth.
“It’s a very desirable development,” said Peter Hooper, chief economist for Deutsche Bank Securities Inc in New York and a former US Federal Reserve official.
The bigger pay checks will help lift output as workers spend the extra money they are getting — and falling energy prices reinforce their purchasing power. Global GDP will rise 3.5 percent next year after expanding 3.2 percent this year, according to the median forecast of 38 economists surveyed by Bloomberg News from Dec. 5 to Wednesday last week.
“A pickup in pay should be supportive of a further acceleration in consumption,” Credit Suisse Group AG co-headof global economics and strategy Neville Hill said.
The stepped-up salaries eventually may lead to faster inflation as companies raise prices to make up for their increased labor costs.
That is something central bankers, including Kuroda, will embrace rather than dread, given their determination to avoid deflationary slumps in their economies.
US Federal Reserve Chair Janet Yellen and her colleagues will be taking a close look at what’s happening to wages and inflation when they meet today in Washington for their last two-day policymaking meeting of the year.
Up for consideration: whether to drop their stated intention to hold short-term interest rates near zero for a “considerable time” after they ended their asset-purchase program in October.
The last increase for the benchmark federal funds rate came in 2006.
In Japan, Kuroda and Prime Minister Shinzo Abe — who won a sweeping victory in elections on Sunday — have been urging companies for months to boost wages, arguing that such action is needed to break the country’s decades-long economic funk. Kuroda’s pay increase, to ￥34.7 million (US$294,000), was the first for a Bank of Japan governor in nine years.
There are signs that businesses are starting to follow the central bank’s example. Base salaries rose 0.4 percent in October from a year earlier, a fifth consecutive increase, based on data from the Japanese Ministry of Health, Labor and Welfare.
Large companies are set to boost winter bonuses by an average 5.8 percent this year, the most since 2008, after lifting summer payouts by 7.2 percent, according to preliminary results from a survey by the Keidanren business lobby group.
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