According to the Japantimes article “What to expect from Japan’s economy in 2023” on January 3, 2023, Japan faced challenges like a historic plunge in the yen’s value against the U.S. dollar and decades-high inflation last year. Although it started global economic activities again which was stopped because the COVID-19 pandemic, there are still two key economic issues in Japan, which is inflation, wage hikes.  

Firstly, Japanese yen plummeted past the ¥150 mark to the U.S. dollar for the first time since 1990 because of the Russia-Ukraine war and the historic slide of the yen. In January last year, core consumer prices excluding volatile fresh food rose a mere 0.2% from a year earlier, but by November that figure had reached a nearly 41-year high of 3.7%. This price hikes promoted the government to take some measures to reduce the impact of it. The government will also provide subsidies to contain the rise of electricity and gas bills. 

Secondly, a series of price hikes last year strengthened the calls for wage hikes, which has been one of the structural issues plaguing the Japanese economy. The Japanese Trade Union Confederation called “Rengo” set a goal of pay hike to 5%, which is the highest level in 28 years. For the past seven years, Rengo had demanded increases of around 4%. However, economists say an average 5% raise is unlikely, adding that if labor and management agree to a raise of 3% or more it would be seen as a positive result. In contrast, Daiju Aoki, chief Japan economist at UBS Sumi Trust Wealth Management said, “I think it will be difficult to achieve an over 3% pay hike.” He said it will probably be somewhere around 2.5% to nearly 3%, which would still be the largest hike in years. 

writer: Sakura 

Source:  

https://www.japantimes.co.jp/news/2023/01/03/business/economy-business/japan-economic-outlook-2023/