Second, when firms’ long-term outlook for the business environment starts to improve, they are likely to shift their stance toward raising wages. Third, since the rate of growth in labor productivity corresponds to the rate of increase in real wages in the long run, a rise in productivity also exerts upward pressure on wages.
And fourth, an increase in the economy’s long-term growth potential leads to a rise in the natural rate of interest, enhancing the effects of accommodative monetary policy measures. Given these points, it is likely that, as time passes, the long-term positive effects of an increase in supply capacity will gradually outweigh the short-term negative effects on wages and prices.