25/08/2025

BIZ & FINANCE MONDAY | AUG 25, 2025

/thesuntelegram FOLLOW / Malaysian Paper

ON TELEGRAM m RAM

16

BOJ expects tightening job market to push up wages o Salary growth spreading to small, medium-sized firms, says Bank of Japan governor

JACKSON HOLE: Bank of Japan (BOJ) governor Kazuo Ueda said wage hikes are spreading beyond large firms and likely to keep accelerating due to a tightening job market, signaling his optimism that conditions for another interest rate hike were falling into place. The remarks are likely to reinforce market expectations that the central bank will resume a rate hike cycle, which was put on pause due to concern over the fallout from US tariffs on the export-reliant economy, later this year. Despite Japan’s dwindling working-age population, wage growth remained stagnant for decades due to “entrenched deflationary expectations” that discouraged companies from raising prices and pay, Ueda said at a panel held on Saturday during the Federal Reserve’s annual conference in Jackson Hole, Wyoming. Now, wages are rising and labour shortages have become “one of our most pressing economic issues”, as global inflation caused by the Covid-19 pandemic served as an external shock that broke Japan out of a deflationary equilibrium, he said. “Notably, wage growth is spreading from large enterprises to small and medium enterprises,” Ueda said. “Barring a major negative demand shock, the labour market is expected to remain tight and continue to exert upward pressure on wages,” he said. Ueda spoke as part of a panel including Bank of England governor Andrew Bailey and European Central Bank president Christine Lagarde addressing labour market challenges developing in their economies. Japan has seen three straight years of high wage increases in annual spring wage negotiations between companies and unions. Labour mobility has also risen from historically low levels as the younger generation in particular searches for better-paying jobs, forcing companies to increase pay as they compete for workers, Ueda said. “In sum, demographic shifts that began in the 1980s are now producing acute labour shortages and persistent upward pressure on wages,” Ueda said. “They are also driving significant adjustments on the supply side of the economy – through higher participation, increased mobility, and capital-labour substitution,” he said. Such forces will complicate the relationship between labour market conditions, wages and prices, he added. “We will continue to monitor these developments closely and incorporate our assessment of evolving supply-side conditions into the conduct of monetary policy.”

(From left) Bailey, Lagarde, Ueda and Federal Reserve chairman Jerome Powell posing for a photo in Jackson Hole. – REUTERSPIC

second-round price effects that could warrant another rate hike, a summary of the bank’s July meeting showed. Nearly two-thirds of economists polled by Reuters in August expect the BOJ to raise its key interest rate by at least 25 basis points again later this year, up from just over half a month ago. – Reuters

While consumer inflation has exceeded the BOJ’s target for well over three years, Ueda has vowed to go slow in hiking rates as underlying inflation – or price rises driven by domestic demand – remains short of 2%. But stubbornly high food inflation and prospects of sustained wage growth have led some BOJ board members to warn of

After exiting a massive, decade-long stimulus last year, the BOJ raised interest rates to 0.5% in January on the view Japan was on the cusp of durably achieving its 2% inflation target. The BOJ kept rates steady in July but revised up its inflation forecasts and offered a less gloomy outlook on the economy, keeping alive market expectations for a rate hike this year.

India working with French firm to develop, produce fighter jet engines

Australia’s treasurer praises report urging company tax reform

a way that we can afford,” he told ABC television, adding that: “I am open to tax changes which incentivise investment if we can afford to do it”. He said the plan was part of talks this week at an economic reform roundtable in Canberra. The meeting included business leaders, the union movement and civil society groups. “There was a lot of discussion at the roundtable about the draft recommendations,” Chalmers said. “I think that’s a really good thing.” Chalmers’ comments come after the centre-left Labour government in June said it would consider tax reforms to boost productivity and build economic resilience amid a spike in global volatility. The nation’s central bank this month slashed its forecasts for economic growth as it downgraded the outlook for productivity, implying lower living standards and incomes for the country’s 27 million residents. – Reuters

SYDNEY: Australia’s treasurer yesterday praised a report by the nation’s Productivity Commission (PC) that urges lower corporate tax rates in a bid to spur foreign investment. The draft report, Creating a More Dynamic and Resilient Economy , released in July, recommended reducing the tax rate from 25% to 20% for companies earning less than A$50 million (RM137 million) and from 30% to 20% for those earning A$50 million to A$1 billion. The changes would help attract more overseas firms to invest in Australia, the report by the government’s advisory body on economic, social and environmental issues said. When asked by the Australian Broadcasting Corporation about the PC report yesterday, Treasurer Jim Chalmers said: “It’s good that this proposal is out there”. “The PC chair and her colleagues have tried to incentivise investment in

purchase 26 Rafale fighter jets from France’s Dassault Aviation. It would join 36 Rafale fighters already acquired, and replace the Russian MiG-29K jets. Rajnath has also promised at least US$100 billion (RM423 billion) in fresh domestic military hardware contracts by 2033 to spur local arms production. This decade India has opened an expansive new helicopter factory, launched its first domestically made aircraft carrier, warships and submarines, and conducted a successful long range hypersonic missile test. New Delhi eyes threats from multiple nations, especially Pakistan. India was engaged with its neighbour in a four-day conflict in May, their worst standoff since 1999. – AFP

production in India,” Rajnath said. The minister did not name the company, but India media widely reported the company to be Safran, which has been working in India for decades in the aviation and defence sectors. There was no immediate confirmation. India, one of the world’s largest arms importers, has made the modernisation of its forces a top priority, and made repeated pushes to boost local arms production. The world’s most populous nation has deepened defence cooperation with Western countries in recent years, including the Quad alliance with the United States, Japan and Australia. India signed in April a multi-billion-dollar deal to

NEW DELHI: India is working with a French company to develop and manufacture fighter jet engines in the country, New Delhi’s defence minister said. Defence Minister Rajnath Singh in May approved the prototype of a 5th generation Advanced Medium Combat Aircraft (AMCA), calling it a “significant push towards enhancing India’s indigenous defence capabilities”. Rajnath, in a speech at a conference in New Delhi last week, gave more details about developing fighter jet aircraft engines in the country. “We are moving forward to manufacture aircraft engines in India itself,” the minister said, in comments broadcast by Indian media. “We are collaborating with a French company to start engine