Price Trends and Labor Market

ito: Core consumer prices rose 0.3 percent in April, the government reported last week, well below the BOJ's 2 percent goal, according to The Japan Times. Ito said he disagreed with former Federal Reserve Chairman Ben Bernanke, who said last week during a visit to Tokyo that if Japan continues to struggle to generate inflation, more explicit coordination of monetary and fiscal policy could be the most promising option. The tight labor market is bringing long-awaited pay increases to some workers, but the practice of setting wages based on looking at past price trends needs to be abandoned to achieve the pay rises needed for sustainable inflation, said Ito, who is considered a candidate to be the next head of the Bank of Japan. Ito said the power of monetary policy is fading and that further government stimulus could risk loosening fiscal discipline. An index of profitable companies that reward workers well could be created to attract investors to these businesses, including the Government Pension Investment Fund, he said. Instead, Japan should consider a big, one-time jump in the minimum wage, as well as taxing cash-hoarding companies to prompt them to raise wages. (news.financializer.com). As reported in the news.