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BOJ Chief Ueda Sees Wage Hikes Spreading, Signaling Rate Hike Ahead
23 Aug
Summary
- Wage growth spreading from large firms to SMEs
- Labor shortages becoming a pressing economic issue
- Ueda expects tight labor market to keep exerting upward pressure on wages
On August 23, 2025, Bank of Japan Governor Kazuo Ueda spoke at the Federal Reserve Bank of Kansas City's Jackson Hole Economic Symposium, sharing his optimistic outlook on Japan's economic conditions. Ueda noted that wage growth is now spreading from large enterprises to small and medium-sized firms, a sign that the tight labor market is exerting persistent upward pressure on wages.
Ueda explained that Japan's dwindling working-age population had previously led to stagnant wage growth due to "entrenched deflationary expectations." However, the global inflation caused by the COVID-19 pandemic served as an external shock that broke Japan out of this deflationary equilibrium. As a result, labor shortages have become "one of our most pressing economic issues," according to Ueda.
The BOJ governor expressed confidence that barring a major negative demand shock, the tight labor market will continue to drive further wage increases. Ueda stated that labor mobility has also risen from historically low levels, as the younger generation searches for better-paying jobs, forcing companies to raise pay to compete for workers.
Ueda's remarks are likely to reinforce market expectations that the Bank of Japan will resume its rate hike cycle later this year, after pausing due to concerns over the impact of U.S. tariffs on Japan's export-reliant economy.
