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Downward Nominal Wage Rigidity in Japan: Is Price Stability Costly?

Author

Listed:
  • Takeshi Kimura

    (Bank of Japan)

  • Kazuo Ueda

    (Bank of Japan)

Abstract

This paper analyzes whether or not Japanese nominal wages are rigid downward. By using time series cross section data on wages from the Japanese Wage Census, we find that wages do not exhibit serious downward rigidity. They do decline when macro labor market conditions worsen even in periods of low inflation rate. Japanese wages per man-hour, however, do not respond to micro shocks. Firms have avoided large employment adjustments in response to micro shocks by changing overtime hours worked. We tentatively conclude that there is no long-run trade off between the goal of stable prices and low unemployment in Japan.

Suggested Citation

  • Takeshi Kimura & Kazuo Ueda, 1997. "Downward Nominal Wage Rigidity in Japan: Is Price Stability Costly?," Bank of Japan Working Paper Series Research and Statistics D, Bank of Japan.
    • Handle: RePEc:boj:bojwps:97-e-1r
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    Cited by:

    1. Steinar Holden, 2005. "Wage Formation under Low Inflation," Springer Books, in: Hannu Piekkola & Kenneth Snellman (ed.), Collective Bargaining and Wage Formation, pages 39-57, Springer.
    2. Holden,S., 2001. "Monetary policy and nominal rigidities under low inflation," Memorandum 16/2001, Oslo University, Department of Economics.
    3. David E. Lebow & Raven E. Saks & Beth Anne Wilson, 1999. "Downward nominal wage rigidity: evidence from the employment cost index," Finance and Economics Discussion Series 1999-31, Board of Governors of the Federal Reserve System (U.S.).
    4. Inoue, Tetsuya, 1998. "Impact of Information Technology and Implications for Monetary Policy," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 16(2), pages 29-60, December.
    5. Kimura, Takeshi & Ueda, Kazuo, 2001. "Downward Nominal Wage Rigidity in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 15(1), pages 50-67, March.
    6. Anthony Yates, 1998. "Downward nominal rigidity and monetary policy," Bank of England working papers 82, Bank of England.
    7. Steinar Holden, 2002. "The Costs of Price Stability - Downward Nominal Wage Rigidity in Europe," NBER Working Papers 8865, National Bureau of Economic Research, Inc.

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