Japan’s Prime Minister, Fumio Kishida, recently announced his resignation following months of poor public support and struggles with a weak yen. Despite implementing significant wage increases, the devaluation of the yen led to higher prices and diminished consumer confidence in the recovering economy.
His successor will inherit the challenge of managing the impact of the weak yen on prices. Kishida’s tenure was marked by efforts to boost wages as a key component of his “new capitalism” policy. While large companies responded with substantial pay raises, many smaller businesses did not follow suit, resulting in stagnant real wages.
Despite Kishida’s efforts, the overall impact on economic growth was limited, with real wages only just beginning to rise after months of stagnation. As Japan looks to move past its deflationary history, the next leader must navigate the delicate balance between wage growth, currency stability, and overall economic reform.
While Kishida’s resignation marks the end of an era, it also presents an opportunity for Japan to embrace new economic strategies and overcome longstanding challenges.
“What the market wants to see and what is good for the macroeconomy in general is that we see a ‘new wind’,” said Tatsunori Kawai, chief strategist at au Kabucom Securities.
“Someone who is willing to make a big change in Japan.”
END OF AN ERA
© Thomson Reuters 2024.
[ad_2]
Source link
