Wage growth is needed to defeat Japan’s ‘deflation monster’, says investment expert

by Dramelin 5:00 AM 0 comments

Without wage growth to push up inflation, the Bank of Japan will be unable to raise interest rates any time soon, warns Cameron Umetsu, chief Japan fixed income strategist for Mizuho International.
"The policy authorities still have a lot of work to do given the reluctance of corporate Japan to offer significant wage increases amid elevated global uncertainty," he said in a research note published Monday.
"In the final analysis, the BoJ story remains the same - there are no fresh reasons to ease or tighten, so expect steady policy ahead.
" Datta did say that Japanese equities offer good value.
While the Nikkei closed Monday`s session down almost 1 percent to its lowest level since May due to concerns about North Korea, the index of Japanese companies is up 15 percent over the past 12 months.
Seijiro Takeshita, professor of management and information at the University of Shizuoka, also shared his concerns about Japan`s economy with CNBC, saying that the tight labor market (which means there are more jobs available than workers to fill them) is going to cause a lot of problems.
He says tightness in the labor market is resulting in corporations expending capital on labor shortage related issues.
"In the short to mid-term that sounds very, very good, but if you look at a longer run, especially considering the structure of Japanese corporations, which is very much skewed towards growth orientation, lack of labor is going to be a very, very big headache," he warned CNBC`s Squawk Box.