Japan wage hikes confirmed to have topped 5% for a third year running

Japan's largest union group Rengo confirms that the final tally of the annual labour talk results showed that Japanese firms have agreed to raise pay by 5.01% on average this year. This figure is of course watered down from the 5.26% according to preliminary estimates, as is typically the case.

That now makes it three years in a row that Japan's wage hikes have topped the 5% mark. The figure above follows up from the 5.25% increase in the previous year and then the 5.10% figure in the year before.

Overall, this continues to support a stronger growth trend and bolsters the case for the BOJ to stay on its rate hike path. As a reminder, sustained wage growth is pretty much a prerequisite and the number one driver in influencing the BOJ to raise interest rates further.

The question now though is that amid the Middle East crisis, how will that play into a weakening Japanese economy in the months ahead? That especially if companies are being hit hard amid rising cost pressures. At the same time, the inflation mix is also being muddied as cost-push factors come into play.

It will take time to sort out the mess. As such, the BOJ might have to wait until the final quarter of this year to have more clarity in terms of deciding what to do next on the policy front.

This article was written by Justin Low at investinglive.com.