BoJ research turns to new data set to study wage-price links

Economists at the Bank of Japan (BoJ) have turned to a unique data set in the search of evidence of how wages and prices interact and are shaped by expectations, publishing their findings in a working paper today (June 21).

Yuichiro Ito and Sohei Kaihatsu of the BoJ's monetary affairs department use data from a Japanese workers' survey, which they say appears to be the only survey in the country to assess wage, inflation and consumption expectations over a long time period.

In Effects of inflation and wage expectations on consumer spending: evidence from micro data, they find actual wage increases and the outlook for business performance are key factors shaping expectations of future wage rises.

Their evidence suggests the number of workers who expect wage rises has been steadily increasing since 2014, which they say "indicates that a virtuous cycle from income to spending is likely to emerge".