Effects of Inflation and Wage Expectations on Consumer Spending: Evidence from Micro Data

Yuichiro Ito and Sohei Kaihatsu
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Yuichiro Ito: Bank of Japan

No 16-E-7, Bank of Japan Working Paper Series from Bank of Japan

Abstract: This paper employs a unique micro dataset in Japan to monitor inflation and wage expectations and investigate their effects on consumer spending. Based on our analysis, wage expectations increased moderately among wider range of employees after the introduction of Quantitative and Qualitative Monetary Easing (QQE). Real wage expectations also recovered recently, although it declined soon after the introduction of QQE, reflecting larger increases in inflation expectations compared with wage expectations. Increases in inflation expectations produced the positive effect on consumer spending on the whole since the positive effect of declines in real interest rates was larger than the negative effect of declines in real wage expectations. Wage expectations were generally influenced by wage perception and business performance outlook. This suggests that improvement in wage expectations needs to associate higher expectations about business performance outlook and realization of wage increases.

Keywords: inflation expectations; wage expectations; Carlson-Parkin method; survey data; Quantitative and Qualitative Monetary Easing (search for similar items in EconPapers)
JEL-codes: D12 D84 D91 E21 E52 (search for similar items in EconPapers)
Date: 2016-06-21
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (4)

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