Major Japanese corporations, including Nissan, Toyota, and Hitachi, have agreed to their largest pay raises in decades after labor unions requested wage hikes to match rising prices. The hefty pay raises come as Prime Minister Fumio Kishida calls on the business community to increase wages to mitigate financial burdens on households hit by soaring prices. However, wage growth in Japan still lags behind other industrialized nations.
Introduction
Japan has a long history of stagnant wage growth, which is a contributing factor to the country’s deflationary economy. Following the collapse of the bubble economy in the early 1990s, wages in Japan remained relatively flat for decades, leading to a decline in consumer spending and overall economic activity.
According to data compiled by the Organization for Economic Cooperation and Development, the average wage in Japan rose only 6.3 percent from 1990 to 2021, compared to more than 50 percent increases in the United States and Britain during the same period.
Labor unions’ requests for wage hikes met by major corporations
Several major Japanese corporations, including Nissan Motor Co. and Hitachi Ltd, have agreed to significant pay increases in their annual wage negotiations, responding to their labor unions’ request to match the rising prices.
Nissan announced an average monthly wage increase of 12,000 yen, which is the most extensive hike since the introduction of the current wage system in fiscal 2004. Additionally, the company will offer bonuses worth 5.5 months’ salary, as requested by the union.
Toyota Motor Corp, which has a significant influence in setting the direction of the country’s shunto pay negotiations every year, has also offered its most substantial wage hike in 20 years. Honda Motor Co has agreed to its most significant base pay increase in over 30 years. Major electronics companies have also agreed to provide pay raises demanded by labor unions, with Hitachi agreeing to a 7,000 yen base pay hike, the most extensive raise since 1998.
Prime Minister calls for increased wages to mitigate financial burdens
These hefty pay raises came as Prime Minister Fumio Kishida called on the business community to increase wages to mitigate the financial burdens on households caused by soaring prices of essential goods like food and gasoline. Inflation-adjusted real wages in the country fell for the 10th straight month in January 2023, according to government data.
In a government meeting with representatives from the business community and labor unions, Kishida expressed hope that wage increases at major corporations would trickle down to smaller companies. He also stated that the government would do its utmost to pave the way for wage increases for workers at small and medium-sized businesses and strengthen such companies’ negotiating power to pass on rising costs to their customers
Despite the recent pay hikes, experts suggest that the pace of increase in base pay needs to catch up with that of prices to generate any significant impact on the economy. The government has expressed hope that these wage increases at major corporations will trickle down to smaller companies.
Wage growth in Japan lags behind other industrialised nations
The pay hikes come after decades of stagnant wage growth in the country, which has been mired in deflation after the collapse of the bubble economy in the early 1990s. According to the Organization for Economic Cooperation and Development, the average wage in Japan rose by 6.3% in 2021 from 1990. The figure is in sharp contrast with the more than 50% increases in the United States and Britain during the same period.
Some companies introduce drastic measures to retain talent
To bridge the wage gap with higher wages overseas, some companies, such as Uniqlo clothing chain operator Fast Retailing Co, have introduced drastic measures. In January, the company announced that it would raise the annual salaries of its domestic employees by up to 40% to retain talent.
Conclusion
In conclusion, major Japanese corporations have agreed on their biggest pay raises in decades, in response to labor unions’ requests for wage hikes that match rising prices. While these wage hikes are a significant step forward, more needs to be done to bridge the gap with higher wages overseas and to generate a significant impact on the economy.
The Japanese government has expressed its commitment to paving the way for wage increases for workers at small and medium-sized businesses, and to strengthening their negotiating power to pass on rising costs to customers.
