A struggle to control inflation, linked to a crisis in energy markets, is the main challenge facing governments and central banks around the world in 2023, according to information.
Japan has a lower inflation rate than Europe and the United States, although food and fuel prices have risen sharply. The problem facing the Bank of Japan is whether to raise interest rates in step with the European Central Bank and the Federal Reserve.
Vision: Prepare for Change
Last year, there was an almost unique trend of keeping interest rates ultra-low. But in December there was an announcement that could change his plan. The Bank of Japan expanded the ten-year band of government bonds that can be traded from 25 to 50 basis points.
Extending the bond limit is not the same as raising interest rates. However, investors thought it was a sign that the Bank was slowly showing policy change.
BoJ has not put its foot on the accelerator. However, he is looking in the rearview mirror and wondering if he should speed up.
My personal opinion is that it is easier to adjust policy now than a year from now.
The governor of the Bank of Japan, Haruhiko Kuroda, is respected by the markets but he will be replaced by someone new in April. There can be trouble when there is a major policy change just like a new person in charge.
Outlook: Countering Inflation
Prime Minister Fumio Kishida will select a new governor from a short list prepared by civil servants.
With the change of leadership, the Bank of Japan has committed to conduct a comprehensive review of its activities over the past ten years. Some of the issues that should be considered is the recent fall in the value of the yen, which has increased the cost of importing fuel and expensive food.
Official data shows that inflation reached 3.6% in November 2022 – more than the target of the BoJ.
There are fears that Japan may go into recession in 2023. The US and Europe are in recession, and the situation in Europe looks like from being very confused.
Vision: More Money, Please
Against such a background, the Japanese Trade Union Confederation ー also known as Rengo ー is expected to use the spring. shunt wage negotiations to push for an overall wage increase of about 5%, the highest in 28 years.
In a move that may seem strange to outsiders, the conservative prime minister Mr Kishida supports Rengo. Although he did not give a figure for his preferred wage increase, the prime minister is urging companies to pay their workers more if they can afford it. And he said it was 2023 shunt is essential to the Japanese economy’s ability to enter a “virtuous cycle of growth and distribution.”
Monitoring: Evaluating the Impact of Wage Increases
Hiroshi Nakaso, Chairman of the Daiwa Institute of Research, said:
Successful shuntō negotiations will ensure a high enough wage increase to meet inflation. This will help dispel people’s pessimism ー which is very arrogant ー and pave the way for the BOJ to standardize monetary policy.
Mr Nakaso believes that too much responsibility for the success of the Japanese economy has been placed on the shoulders of the Bank of Japan. “We need to put a lot of effort into legalization. We need to work towards reform to give an improvement in the delivery of wealth,” said Mr Nakaso in a webinar by about the economy of Japan, organized by the Time of Money.
Professor Ulrich Volz from SOAS, University of London, also participated in the discussion organized by the FT. He believes that a good way to stimulate the needs of families is to improve the financial conditions of young families.
“Japan has a demographic challenge that cannot be addressed by fiscal policies. The number of young people starting families is declining. So why not?” not spending money on childcare and education, to make it easier and cheaper for families to have children – which is really expensive in Japan?” asked Professor Volz .
Vision: Emphasis on Women
The debate on family and child care coincides with another important issue for Japan in 2023: the role of women.
Prime Minister Kishida has placed the economic empowerment of women at the center of his so-called “new capitalism”. Many companies are now required by law to disclose information about the gender pay gap.
Masako Mori, former minister for gender equality recently wrote in the Economist: “Women are Japan’s hidden assets. We must eliminate the obstacles to their success, and ensure they reach their full potential. This will be good for women and will also increase the birth rate. yield and help Japan overcome its population challenges, too.”
Professor Volz from SOAS has noted that although the level of participation of women in the workforce has increased, many women are only in temporary positions and are not well paid.
View: Is charcoal clean?
As countries try to stabilize energy supplies, many are returning to fossil fuels. Professor Ulrich Volz thinks this is a problem from a geopolitical point of view and is not compatible with Japan’s climate goals.
According to the International Energy Agency, the share of fossil fuels in Japan’s energy mix rose to 88% last year.
Professor Volz considers it a “huge” thing and says “there is a great urgency to increase renewables.”
Sayuri Shirai, Professor of Economics at Keio University, has noted that for the time being the Japanese government seems to be willing to continue using imported coal but is hoping to extract energy in cleaner ways. .
He said that China and other Asian countries are taking a similar approach.
“Unfortunately, Japan has no vision for renewables,” Professor Shirai said in the FT’s webinar. “The Federal Government in the United States provides special taxes to encourage investment over many years. However, in Japan the framework is very short.
Author: Duncan Bartlett
Read more stories and stories Duncan Bartlett is a regular contributor. Read his news and articles on JAPAN Forward.