Faster growth of Japan’s base pay strengthens case for rate hikes by central bank

Bloomberg reports that Japanese workers’ base pay growing faster in April strengthened the case for rate hikes by the central bank. 

According to the country’s labor ministry, base salaries increased by 2.2% in April compared to a year earlier, accelerating from the previous month’s gain of 1.4%. Nominal pay grew by 2.3%, with economists’ consensus estimate suggesting a 2.6% rise. A measure that excludes bonuses and overtime showed full-time workers’ wages climbing 2.5%. Meanwhile, real cash earnings fell 1.8%, more than the projected decline of 1.6%.

These results may encourage Bank of Japan Governor Kazuo Ueda to further consider raising borrowing costs, Bloomberg says. However, the central bank is expected to keep the rates steady at its next meeting on June 17. 

The news agency reports that Japanese employers pledge to increase salaries by more than 5% for a second consecutive year. Yet, US tariffs could cut corporate profits in Japan, limiting the ability of companies to offer high compensation to employees.