World Economy

Japan Firms Buckle as Abe Pressures for Rise in Wages

Shinzo Abe has called for wage rises  of 3% or more.Shinzo Abe has called for wage rises  of 3% or more.

Japan Inc is running out of excuses in the face of Prime Minister Shinzo Abe's calls for wage rises of 3% or more. The nation is having its best run of economic growth in a decade, stocks prices are the highest in 26 years, and corporate profits are near an all-time high.

At the same time, the labor market, which is already the tightest among major economies, is only set to get tighter as the nation’s population both shrivels and ages rapidly, Reuters reported.

And as annual negotiations with labor unions start to ramp up, there are signs that some big companies may be bending as Abe pushes for increases of 3% or more, though others are still expected to drag their feet.

Last year, the average increase among 312 major companies was 2.11% before bonuses, according to labor ministry figures.

Successive years of tiny, or even zero, wage increases may be coming to an end at some companies at least—which in turn could provide consumer spending and inflation with a welcome boost this year.

For example, Asahi Group Holdings plans to raise wages by 3% at its operation and by 3.4% at its unit that produces soft drinks. Last year Asahi raised wages by 2.9%.

"This is a result of management's thoughts about how we should treat our employees," President Akiyoshi Koji told reporters at a reception for corporate executives to mark the start of the new year. He denied that the move was influenced by the government's request to raise wages, saying: “An increase in disposable income helps improve the economy.”?

"I want to debate this and do as much as possible to make sure disposable incomes rise," Hitachi Chief Executive Toshiaki Higashihara told reporters at a new year’s reception on Friday. "I approve of raising disposable incomes, because in the end this will improve the economy by raising consumption."

Japan’s Economy Minister Toshimitsu Motegi said on Friday he is confident that the conditions are ripe for increases. "Our policies have created the environment necessary for companies to use their record-high corporate earnings to raise wages and increase investment," he told reporters on Friday after a cabinet meeting.

"I strongly believe our changes to the tax code will encourage companies to take bold steps to raise wages and capital expenditure."


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