this higher minimum wage move is a dangerous policy. yet they are running out of alternatives.
ever easing monetary policy to give companies money to spend on investment and infrastructure has backfired onto reversing yen devaluation, almost back to 2011 values.
meanwhile, companies have stayed put.
and they have now to juggle both the effects of high debt, strong yen and cushioning both the JGBs and Nikkei stock markets.
their targeting has been off course for a while.
giving money to companies helmed by older people (who had ever only thrift on their minds with their elder ages and experiences in post war Japan) only inspires more caution.
giving money(rising yen!!!) to people/companies who are good at asset allocation means people like Masayoshi Son buys foreign assets, like Sprint and ARM, not reflating the economy.
They need to give money to the rising younger Japanese innovators with conditions.
They might hit something.
Higher minimum wage might still work. But foreign orders and companies in primary industries might move on. (already moved to Taiwan at one point with the taiwanese firms absorbing smartphone components manufacturing orders from Japanese firms culminating in Foxconn buying Sharp. until Xiaomi came along and brought orders to Sharp up until the recent yen strength from 2015)
But rather than employing it to try to contain salary and price pressures -- as U.S. leaders did in the 1970s -- the IMF wants Japan to use moral suasion, tax breaks and, as a last resort, penalties to prod companies into granting bigger pay gains and thus promote higher inflation.
“We need policies to support wage increases in Japan,” Luc Everaert, IMF mission chief for the country, told reporters on Aug. 2 after completion of the agency’s annual consultation with the world’s third-largest economy.
The IMF’s backing of such an unorthodox approach is an acknowledgment of how entrenched Japan’s “deflationary mindset” has become and how resistant it’s been to a more traditional mix of policies.
It’s also the lending agency’s answer to exhortations by some economists that Japan launch so-called helicopter money -- direct central bank financing of the government’s budget deficit -- a strategy Everaert said has “very large risks.”