Japan Workers Win Biggest Pay Raises in 20 Years

Japanese workers appear headed for their biggest wage increase in two decades as companies led by the logistics and retail sectors compete for a slice of the country’s ever-shrinking workforce.

Businesses lifted wages by an average of 2.41% this year, according to data collected by Nikkei as of April 3. This raise—made up of base pay and automatic, seniority-based pay—topped last year’s average increase by 0.35 percentage point, the first such growth in three years.

In value terms, monthly pay rose by an average of 7,527 yen ($70), also the highest since 1998.

Rising wages in Japan usually are driven by manufacturers. But non-manufacturers have taken the lead this year for the first time since 1997. They increased pay by 2.79%, their biggest hike in 21 years and more than half a point above the raises from manufacturers.

Logistics providers and service industry players in particular are working harder to attract employees. Yamato Transport agreed to the full 11,000-yen increase in monthly base pay, or 3.64%, requested by the Yamato Holdings unit’s labor union during annual wage negotiations.

The logistics sector enacted an average pay raise of 3.39%, the highest across all industries and the only one with an average increase exceeding 10,000 yen. The industry is struggling to keep pace with the surge in demand for e-commerce shipments.

Department stores and supermarkets raised wages by 2.53%. Grocery store chain Life Corp. will raise salaries for full-time employees by 3.86%, while also pledging to increase wages for part-time workers.

Manufacturers boosted pay by 2.27%, just 0.18 point more than in 2017. Toyota Motor, which likely posted a record net profit for the fiscal year ended in March, has agreed to a 3.3% pay raise but is not releasing specific yen figures.

Many big electronics makers such as Hitachi and Panasonic are offering just 1,500 yen more in base pay this year. Sony, which is not part of industry-wide negotiations with unions, decided on a 5% increase to final yearly pay as the company hopes to attract experts in artificial intelligence and other technologies to boost its competitiveness.

Yet Japanese wages continue to fall in real terms due to rising food and oil prices. The government has urged companies to boost pay for the past five years, and Prime Minister Shinzo Abe gave a specific target for the first time this year, calling for 3% raises.

Businesses are catching on, primarily because they need to secure the talent to compete on the global stage. Many companies are switching away from a seniority-based wage structure and raising starting salaries.

Competition for workers is particularly fierce in the technology sector. Job postings for data scientists have quadrupled in a year, recruitment services provider en-japan said. Companies from China and elsewhere also are luring Japanese graduates away with generous offers.

Some companies are focusing on seniors to overcome labor shortages. West Japan Railway and farm equipment maker Kubota are including post-retirement hires 60 and older in their pay increases. Honda Motor pushed back its retirement age last year and raised pay for senior employees.