Japan PM Kishida sets eye on wage rises as focus of ‘new capitalism’

Prime Minister Fumio Kishida stated on Wednesday that Japan will develop a plan in June for “new capitalism,” focusing on wage growth, innovation, and resolving social issues by supporting start-ups.

Kishida has been promoting the concept of “new capitalism” since becoming prime minister in 2021. He pledged to correct inconsistencies in the world’s third-largest economy and indicated a departure from reflationary policies by stating that there would be no growth without redistribution. Kishida said he called it “new capitalism” because of the need to alleviate downsides such as expanding inequality.

Kishida aims to narrow the wage gap between domestic companies and their foreign rivals by pushing for structural wage increases, while taking into consideration different economic situations.

Kishida has placed human capital investment at the heart of his growth strategy, particularly since ageing Japan is facing a serious labour shortage as its working-age population declines.

Major enterprises, under pressure from Kishida, have completed their annual labour talks, resulting in an average wage increase of 3.8% for the next fiscal year, the largest in almost three decades. However, smaller firms that account for nearly 70% of the workforce are less optimistic about the future of their employees’ salaries.

Since the late 1990s, salaries in Japan have remained almost unchanged, and they are now far behind the average of rich countries in the OECD group.

Reporting by Tetsushi Kajimoto; Editing by Raissa Kasolowsky, Robert Birsel.

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