Price Markups and Wage Setting Behavior of Japanese Firms
April 21, 2023
We estimate price markups and wage markdowns of Japanese firms using a newly constructed dataset of individual firms' financial statements -- which covers about 80 percent of the Economic Census in terms of sales size. We find that Japanese firms have secured profits by increasing markdowns amid a declining trend in markups, which has ultimately led to the stabilization of the labor share in the long run. We also find that this trend has been more pronounced among small firms in the non-manufacturing sector. Comparing our results with the U.S., (1) markdowns have increased in both Japan and the U.S., however, (2) the decline in markups in Japan is in stark contrast to the U.S., where the rise of the so-called superstar firms with strong market power has led to expansions of markups for the whole corporate sector.
E24, E31, J30, J42, L12
Price markup; Wage markdown; Monopsony; Labor share
The authors would like to thank Ichiro Fukunaga, Ryo Jinnai, Daiji Kawaguchi, Teppei Nagano, Mitsuhiro Osada, Kenichi Sakura, Toyoichiro Shirota and Bank of Japan staff for their helpful comments and discussions. The Ministry of Economy, Trade and Industry (METI) provided data from the Basic Survey of Japanese Business Structure and Activities, and the CRD association provided data from the Credit Risk database. Any remaining errors are attributable to the authors. The views expressed in this paper are those of the authors and do not necessarily reflect those of the Bank.
- *1Department of Economics, University of Tokyo
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- *2Research and Statistics Department, Bank of Japan
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- *3Research and Statistics Department, Bank of Japan
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