Assessing Wage-Price Spiral Risk Through Real Wages and Terms of Trade

Mizuho argues that Japan's wage-price spiral risk is low as worsening terms of trade from high energy costs and a weak yen offset base salary gains. They expect the BOJ to maintain a gradual rate-hike pace of 0.25% every six months.

Key Takeaways

• 1.The risk of an inflationary wage-price spiral in Japan is low because deteriorating terms of trade, driven by high energy prices and a weak yen, pressure real wages downward.
• 2.Real wages grew +1.3% YoY in March 2026, marking the fourth consecutive monthly gain, supported by government energy subsidies.
• 3.Mizuho maintains its baseline forecast for BOJ rate hikes at six-month intervals, projecting the policy rate to reach 1% in June 2026 and 1.5% by June 2027.

Table of Contents

• Assessing wage-price spiral risk through lens of real wages and terms of trade
• Relationship between real wages and worsening terms of trade
• When will high energy costs spill over into wages and prices?
• Jiji Press report on BOJ and risk of falling behind the curve
• Important Disclosure Information
• Analyst Certification
• Disclaimer

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