Japan: Behind the Shōji
The buoyant Japanese labour market is finally generating some wage pressure. But Japanese demographics have created a structural demand deficit of epic proportions. Consumption is caught in a pincer movement between the low birth-rate and an aging population. This means that there will be little transmission from faster wages to prices. It also means that investment outflows are likely to rise. The yen will be a structurally weak currency because of this. That’s positive for Japanese equities. But it complicates the BoJ’s exit from QQE.