Japan
The Japanese economy is currently in a phase where wage increases and the burden of high resource prices are increasing at the same time. During this year's spring labor market, major companies responded at a high level one after another, raising expectations for wage improvements, but for households to realize the benefits, it is essential that the effects spread to a wide range of people in a way that outpaces the rise in prices. In particular, as energy prices continue to rise, nominal wage growth alone may not be enough to support consumption.
The movement towards wage increases is a positive factor for the Japanese economy. With the high level of responses from large companies, there is hope that the trend of improving working conditions will become established, especially at companies with severe labor shortages. However, the focus going forward will be on whether small and medium-sized enterprises will be able to implement similar wage increases, and companies with weak ability to pass on price increases will face heavy constraints on their profits. Unless wage increases are spread across the board, including to non-regular workers, the recovery in personal consumption is likely to be limited.
On the other hand, rising gasoline prices are directly hitting household budgets. The national average regular gasoline price reached an all-time high, reaching new highs in 44 prefectures. The background to this is the rise in crude oil prices due to the situation in the Middle East, and crude oil futures are also rising significantly. Rising fuel costs tend to have a ripple effect on a wide range of prices, including through logistics costs and electricity rates, and there are concerns that this could offset the effects of wage increases.
Overseas, the US Federal Reserve (FRB) left policy interest rates unchanged for two consecutive meetings, showing caution over uncertainties including the situation in the Middle East. The market is likely to continue to wait to see when the U.S. will start cutting interest rates, and there is a possibility that Japan will also be affected through foreign exchange and capital markets. Additionally, the US intelligence agency's analysis that China is not planning to invade Taiwan by 2027 has given some material to the view of tensions in East Asia, but it cannot be said that regional security risks have receded. There have also been reports of a temporary ceasefire between Pakistan and Afghanistan, but this does not seem to indicate that overall geopolitical risks have subsided.
The immediate question for Japan is whether domestic demand will be supported by wage increases or real incomes will be put under pressure by high energy prices.企業収益が底堅く、中小企業や非正規雇用にも賃上げが広がれば、景気の下支えにつながる余地はある。 However, if high oil prices and uncertainty about overseas situations persist, households will become more frugal, potentially slowing the pace of economic recovery.