Structural labor shortages in Japan could be a 'game changer': Strategist
You’re saying that this is the most opportune moment for the BOJ to continue hiking rates and yet they’re not signaling that well. The BOJ right now is in wait and see mode. I think that although there are some very good signals for domestic demand in Japan, one of the big things that we haven’t seen is the household participating in this recovery. Corporates have, of course, exports have been pretty strong, especially with the weak yen. But house households haven’t jumped in and shown that they want to be consuming more. They want to be investing instead of holding on to cash. And so it’s kind of the last link of that chain or the last piece of the the virtuous circle. They’re probably more likely to do so to jump in and really join in the the growth party when real wages are definitively seen to be rising however. But are they because it it it’s so ingrained culturally because this is something that has been going on for the past 30 years and it’s almost akin to what we are seeing in China right now on the consumption and having the same problems, you know in terms of the savings rate but. It’s one thing for you know the exporters to be giving higher wages or even some of the the retailers and everyone looks at them and they see that the Ringo. But if you’re talking about the biggest subset, those small to medium employers and the the pressures they’re facing are, are we certain that everything that you know they’re doing on the stimulus front is actually going to work And if they start hiking rates, they’re not going to send them back into another 10 years of a deflationary cycle. So I. Personally, not so sure that the deflationary mentality is a cultural phenomenon. Of course it is very persistent and inflation expectations, deflation expectations in this case tend to be very persistent. However, we have seen the one thing I think that that could be a big game changer and that is structural. Labor shortages, skilled labor shortages. And that is not only affecting the large exporters, that is affecting big firms, small firms especially affecting the firms that are. Labor intensive. And so if we take a look at that picture, there is no easy answer. If you want to continue operating, then to raise wages, to attract and retain labor and at the same time perhaps you can introduce some labor saving technology. But that’s not an overnight solution either. It takes time, it takes investment and it takes innovative thinking.