Several Bank of Japan board members noted wages will likely rise next year, however, they stressed the Bank needed to clarify its wage-hike outlook, according to the July 27-28 meeting minutes released on Wednesday.

“Members shared the recognition that, in projecting future price developments, it was important to determine whether changes in firms' wage- and price-setting behaviour would progress and wage hikes would continue next year and beyond,” the minutes showed.

“One member – noting that the inflation rate was likely to fall below the 2% level in the second half of fiscal 2023 – expressed the view that, in order for this rate to then rise again to 2% and continue to stay at that level in a stable manner, it was important that a trend in which wage growth surpassed the rate agreed in the 2023 annual spring labor-management wage negotiations took hold.”

However, another member expressed the view that the profitability of small and medium-sized firms was weak, as evidenced by about 60% of them operating at a loss, and it was necessary to confirm whether wages would rise across a wider range of such firms in future.