Japan Inc delivers largest wage increases in decades

By Tetsushi Kajmoto and Kiyoshi Takenaka

TOKYO, Reuters – Japanese top companies gave their highest pay increases for a quarter century in annual labour talks that concluded Wednesday. They heeded, at least for the moment, Prime Minister Fumio Kirshida’s demands for higher wages to combat rising living expenses.

The sluggish growth of Japan’s third-largest economic country has caused the loss of worker pay over the past few years. Japanese salaries are now well below the OECD median.

However, a weakening yen and rising commodity prices have pushed up import costs and driven inflation to its highest level in over 40 years. This has prompted Kishida’s call for higher pay.

At, the average salary increased “shunto” According to the Keidanren lobby, this year’s spring wage talks were the most successful in over 30 years. This puts the increase in line with analysts’ expectations of a rise of nearly 3%, which would have been the highest since 1997 when it was 2.9%.

“This spring marks a turning point for growth and wealth distribution,” Kishida addressed a meeting of representatives from unions and business lobbyists. He also stated that he was aiming for a nationwide increase to the minimum wage.

A number of Japan’s biggest corporations – including Toyota Motor Corp and Hitachi Ltd – said they had agreed fully to the requested increases from unions, results that were widely flagged in recent weeks.

“Given the surge in prices, employee expectations were running higher than most years,” Kenichi Tanaka, Vice President Hitachi, spoke at a briefing.

Rengo, the umbrella labour group, had requested a 5% increase in pay.

The talks this year marked the first time that all the major Japanese automakers had accepted union demands, Akihiro Kanneko, president of an umbrella group containing automaker unions stated.

‘I’M SO JEALOUS’

But for workers at smaller companies – which make up almost 70% of Japan’s workforce – the outlook was less rosy. These companies have struggled to pass rising costs onto their customers.

“I’m so jealous of workers at companies like Toyota,” Takehiro Kato works as a truck manufacturer, where wages have barely risen. His employer gave him a temporary allowance to combat inflation.

“You can’t count on money like that, because you don’t know when you’ll get another such payment again,” He said.

It remains to see if the upward wage trend can be sustained, let alone create the opportunity. “virtuous cycle” Japan’s central banks long desired stronger economic growth, and 2% inflation.

For sustainable inflation to be achieved, the central bank places great importance on wage growth. They argue that recent price increases have been caused by external factors like higher import costs and not an increase in domestic demand.

It has been a leader among the major central banks in keeping ultra-low rates of interest for the last year.

The final months of 2022 saw Japan’s economy avoid a recession due to weak consumption.

TEMPORARY ACTION

“Rather than a change in the stance of companies, this is more a case of a temporary reaction to unexpected and historically high prices,” Takahide, an ex-member of the Bank of Japan Board member, is now executive economist at Nomura Research Institute.

“It is unlikely that wage hikes will just continue next year and after regardless of what happens with prices.”

According to a survey by Japan Economic Research Center (JERC) of 33 economists, it was expected that big companies would raise wages by 2.85% prior to the talks. These talks will include both base and bonus payments.

Hitachi announced Wednesday that it will increase average wages by 3.9%, as opposed to 2.6% a year ago.

“We must not make this wage hike just a one-off thing,” Masashi Jimbo, President of the Japanese Electrical Electronic & Information Union.

On Wednesday, Kishida’s government will hold a joint meeting of the three parties with labour and management to secure structural wage rises for the first time since 2008.

FOLLOW THIS PACE-SETTER

After the setting of wage paces by such companies as Toyota Motor Corp, over 300 major companies negotiate with their unions every March

Unions have traditionally settled for relatively modest pay increases of around 2% over the past few years because they prefer to work with management to maintain job security, rather than demanding higher pay.

Some analysts also doubt that unions would be as aggressive in demanding higher salaries in the coming years if inflation declines as it is now.

January saw the slowest decline in real wages since May 2014, when the sales tax was increased to 8% from the 5%.

Japan’s wage growth has been just 5% over the past 30 year, which is much less than the 35% average gain of member countries in that time period, OECD data indicates.

(Reporting by Tetsushi Kummoto and Kiyoshi Takenaka; Additional Reporting by Daniel Leussink and Miho Uranaka; Editing by Sam Holmes and Kim Coghill

The February consumer price index report shows an inflation rate of 6%, compared to a year ago.

California Governor Gavin Newsom said he has a multi-million-dollar deal with Walgreens regarding abortion pills.

Rep. Steve Toth

Alex Bruesewitz

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