Japan’s wage hikes will expand income gaps

Significance Elevating stagnant wages is Tokyo’s top priority and anti-deflation tool, necessary in creating a virtuous cycle of rising prices and incomes that boosts economic growth. Impacts The wage rise at small and medium-sized enterprises (SMEs) will be of a smaller scale. Many SMEs will not raise wages due to lack of resources and expanding wage gaps. Numerous SME employees will be at risk of a fall in real wages and purchasing power. Fostering a rise in real wages will be a challenge for many SMEs amid strong inflationary pressures on the economy.