Headline: UK Pay Rises Cool as Asia Signals Diverging Policy Paths
Introduction: Labour markets and monetary policy are moving in different directions across major economies. UK employers see modest wage growth and rising automation risks, while central banks in Japan and Australia strike a cautious tone. At the same time, Japan leans toward fiscal stimulus and China eases critical-mineral export curbs, reshaping supply chains and inflation dynamics.
UK employers expect average pay rises of around 3% over the coming year, but many are bracing for the impact of artificial intelligence on jobs. One in six firms plans to reduce headcount, and hiring remains subdued. Employer groups are urging the government to avoid tax changes that could further dampen recruitment, highlighting a fragile labour market and ongoing productivity challenges.
In Asia, the Bank of Japan signalled growing support for further interest-rate increases—provided wage gains and inflation hold—underscoring the central role of wage growth in its normalisation path. Views differ on timing, reflecting uncertainty around global and domestic risks. In Australia, the Reserve Bank’s leadership noted it’s reasonable to expect rate cuts down the track, yet stressed that policy must stay restrictive for now to bring inflation to target in an economy still running tighter than typical during a recovery.
Policy signals also shifted on the fiscal and trade fronts. Japanese leadership moved away from a strict annual budget target and prepared new stimulus despite record public debt, prioritising growth support. Meanwhile, China suspended export restrictions on gallium, germanium, antimony, and related inputs to the United States until late 2026, easing pressure on technology and semiconductor supply chains and potentially tempering cost pressures in advanced manufacturing.
Key Points: – UK employers forecast roughly 3% pay increases, with weak hiring and rising AI-related job risks. – One in six UK firms plans workforce reductions; business groups warn against tax changes that could hit recruitment. – Bank of Japan signals openness to rate hikes if wage and inflation trends persist, though timing remains debated. – Australia’s RBA says restrictive policy is still needed to tame inflation, even as future cuts are plausible. – Japan shifts toward fiscal stimulus, softening its consolidation stance despite high debt. – China pauses export curbs on gallium, germanium, and antimony to the U.S. through late 2026, easing supply-chain strains.
