TOKYO: Japanese firms agreed to raise wages by more than 5% on average this year, on course for their most substantial pay hike in over three decades – a relief for many workers though it’s unclear if the increases will lead to a meaningful jump in consumer spending.
As annual labour negotiations wrapped up this week, many of Japan’s biggest companies said they met union demands in full. Some, such as electronics conglomerate Hitachi, delivered record pay increases, though a few sectors were left out in the cold.
Hefty pay hikes have been seen as essential to counter inflation-induced sharp increases in the cost of living. Many companies, emboldened by record profits on the back of a weak yen, are also keen to retain staff amid labour shortages.
More broadly, policymakers have long urged Japan Inc to lift pay so ordinary citizens might break out of a mindset conditioned by decades of deflation that has made them reluctant to spend with confidence.
The 5.46% preliminary reading from Rengo, a 7 million member-strong group, represents the third year in a row of substantive increases for base pay and the highest increase in 34 years.
It compares with last year’s preliminary reading of 5.28% which was then revised down over several stages to 5.1%. Final tallies are usually lower than preliminary figures as most agreements for smaller companies are factored in later.
While robust, the headline number was probably not enough to encourage the Bank of Japan to hasten its pace of hiking interest rates every six months or so.
Economists also worry that most of the wage growth will go towards offsetting inflation. Headline consumer inflation, including fresh food prices, hit 4.0% in January, a two-year high.
Nana Nagayama, 51, who was visiting Tokyo from the northern island of Hokkaido on a graduation trip for her daughter, said her husband hasn’t mentioned any expectations of a big increase and expects money to continue to be tight.
He also said would consider imposing it for a longer period.
