TOKYO: Rising inflation and an intensifying labour crunch are prodding smaller local Japanese firms to follow their big counterparts in raising pay, a move that can generate broader wage hikes and encourage the central bank to phase out its massive stimulus.
Wages have barely risen in Japan since the asset bubble burst in the 1990s but have crept up recently, as companies face pressure to compensate employees for the rising cost of living.
Importantly, smaller firms are also starting to raise pay even as many of them face a margin crunch. A durable rise in wages is an important consideration for policymakers who seek to foster sustainable demand-driven inflation in the world’s third-largest economy before starting to unwind monetary stimulus.
Huis Ten Bosch Co is just the kind of company that policymakers would want to see more of to stimulate a virtuous cycle of wages, prices and economic growth.
The theme park operator in southern Japan unveiled a plan last month to hike pay by 6 per cent in the financial year 2024 – a rare move to pre-empt wage hikes for the next year.
“Customers have returned to pre-pandemic levels. Moreover, we want to give staff a sense of security in the face of rising living costs,” Yu Ito, spokesperson at the park operator’s president’s office, told Reuters.
“We want to keep the positive momentum going.”
Nearly 60 per cent of Japan’s small and medium enterprises (SMEs) plan to lift wages this year with about 20 per cent aiming for a hike by 4 per cent or more, a survey by the Japan Chamber of Commerce and Industry showed in March.
Even those unable to hike basic pay sought to compensate employees with higher bonus payments.
Suzette Holdings Co, a high-end confectionary maker in the western city of Ashiya, which runs more than 100 shops nationwide, has offered a bonus this year that is 1.3 times the average of the previous two years as sales returned to pre-COVID levels.
“We want to reward employees by raising wages for as long as possible so that we can attract talent,” company president Goki Arita said.
Big firms offered pay hikes of 3.8 per cent this year in annual wage talks with unions that ended in March, the largest increase in three decades. Attention has now shifted to whether small firms, which employ seven out of 10 workers in Japan, would follow suit.
Bank of Japan (BOJ) officials have said the outcome of small firms’ wage talks, which will get into full swing towards June, will be key to whether Japan will see durable pay hikes to enable it to phase out its massive monetary stimulus.
“Many regions said wage hikes were broadening, even among small and mid-sized firms due to intensifying job shortages and rising inflation,” the BOJ said in a summary of a meeting of its regional branch managers earlier last month.
