Capital Economics: Slowing wage growth in Japan is unlikely to prevent the Bank of Japan from raising interest rates

Golden Ten Data reported on July 7 that Abhijit Surya, Senior Asia-Pacific Economist at Capital Economics, stated that the slowdown in Japan’s wage growth in May is unlikely to prevent the Bank of Japan from further raising interest rates. He pointed out that preliminary data released earlier showed that the growth rate of Japanese labor cash income slowed from 3.6% in April to 3.2% in May. Surya said: “Despite the recent slowdown, all indicators of base wage growth remain well above the 2025 average and are still high relative to historical levels.” He added: “We believe today’s data is unlikely to change the Bank of Japan’s fundamental assessment that the labor market remains tight.” Capital Economics maintains its view that the Bank of Japan will raise interest rates to 2% by the end of 2027.