Japan's Shrinking Workforce Driving Changes in Labour Market, BOJ Research Shows
By Leika Kihara
The Bank of Japan released two research papers on Tuesday highlighting the impact of Japan's dwindling working-age population on the labour market. The findings suggest that firms are facing increased pressure to raise wages and service prices due to structural changes in the workforce.
According to the central bank, the persistent labor shortages in Japan have led to stagnant wages for permanent workers, as female and elderly workers have taken on low-paid, part-time jobs to fill the gap. However, as the pool of available female and elderly workers shrinks and job hoppers increase, companies are starting to increase wages for permanent workers.
The BOJ's research indicates that this trend is expected to continue, with ongoing labor shortages driving changes in wage-setting behavior among companies. As a result, wage pressure is becoming a key driver of inflation, replacing raw material costs.
In addition, the central bank's research shows that service-sector prices have been rising due to increasing labor costs. Services such as English lessons, tuition, and massage have seen price hikes as companies adjust to higher wage pressures.
The BOJ has already taken steps to address these inflationary pressures by ending negative interest rates and raising short-term borrowing costs. BOJ Governor Kazuo Ueda has stated that the central bank will continue to raise interest rates if economic growth and inflation meet expectations.
In conclusion, the changing dynamics of Japan's labor market are likely to have significant implications for wages and prices in the country. As companies face increasing pressure to raise wages and service prices, consumers may experience higher costs for goods and services. This shift in the labor market could impact the overall economy and individuals' finances, highlighting the importance of staying informed about these developments.