The Bank of Japan has published a working paper using Japanese household survey microdata that finds the link between households' wage growth expectations and price inflation expectations has strengthened in recent years. The paper also finds that households with a stronger link tend to maintain relatively stronger spending attitudes during periods of rising prices because they expect smaller declines in real income. The estimated degree of linkage differs significantly across households and is associated with labor market conditions such as labor market tightness and labor mobility, as well as income levels and labor union membership. The authors suggest that Japan's reduced room for additional labor supply, partly due to population aging, may have contributed to the stronger linkage. The paper concludes that keeping wage growth expectations appropriately aligned with inflation expectations matters for sustaining consumption and supporting sustainable economic growth. As part of the Bank's Working Paper Series, the paper is intended to stimulate discussion and the views expressed are those of the authors, not necessarily those of the Bank of Japan.
Bank of Japan2026-05-22
Bank of Japan working paper finds stronger recent link between Japanese households wage and inflation expectations
The Bank of Japan published a working paper finding that the link between Japanese households’ wage growth expectations and inflation expectations has strengthened, with households exhibiting a stronger link maintaining higher spending attitudes during periods of rising prices. The paper attributes differences in this linkage to labour market conditions, income levels and union membership, and suggests that limited additional labour supply due to population ageing may have reinforced it, concluding that aligning wage growth expectations with inflation expectations is important for sustaining consumption and growth.