TOKYO: The head of Japan’s biggest business lobby Keidanren on Tuesday (Jan 16) urged its members, including many top blue-chip companies, to raise workers’ pay to offset the pain of rising living costs and put a decisive end to deflation.
At stake for this year’s spring wage talks is the outlook for the Bank of Japan’s (BOJ) monetary easing, specifically negative interest rates, which can be phased out once wage hikes and inflation become sustainable, analysts said.
Whether wage hikes and inflation take hold will depend on the pace and extent of pay rises through annual wage talks between major firms and trade unions, to be concluded in mid-March, they said.
Market watchers have been questioning whether the BOJ could ditch its negative rate policy as early as this month, once wage talks show signs of acceleration in wage growth, which are a prerequisite for achieving the central bank’s 2 per cent price target.
Keidanren produce an annual report of its management and labour policy that provides the basis for its stance on annul wage talks with Rengo, Japan’s largest labour unionists’ group.
The latest report released on Tuesday quotes Chairman Masakazu Tokura as saying the business lobby and companies bear “social responsibility to aim for wage hikes that beat price rises” at this year’s wage talks.
“There’s a very strong sense of urgency that Japan’s future rests on whether we can step up a gear to achieve structural wage hikes this year and onwards,” he said, adding that present conditions offer a “last chance” to completely end deflation.
Small firms that employ seven out of 10 employees and so have a greater impact on overall wage growth tend to enter their labour talks with management after big firms wrap up their own negotiations in March.
Conditions for wage hikes that beat inflation appear to be in place at large firms, some of whom have said they intend to implement big salary hikes, though plans at small firms will only be known around mid-year.
Small firms tend to operate on thin margins but many of them also face a labour crunch, a result of Japan’s ageing population, so they have no choice but raise wages to attract talent, analysts said.
Prime Minister Fumio Kishida, BOJ Governor Kazuo Ueda, Keidanren chief Tokura and Rengo head Tomoko Yoshino all seek pay raises that exceed the previous year’s 3.6 per cent, which was the highest in three decades.
The tighter job market amid labour shortages, record earnings and ample cash hoarding make it imperative for workers to share in company profits even more.
The jobless rate stood at 2.5 per cent in November, edging closer to levels last seen during the early 1990s when the asset bubble burst. Job availability was at 1.28 in November, meaning there were nearly 1.3 jobs per job seeker, labour ministry data showed.
While companies hoarded ¥343 trillion (US$2.4 trillion) in cash and savings as at the end of September, the ratio of wages to profits remained relatively low, with room to boost labour costs, analysts said.
Tuesday’s report by Keidanren will be followed by a labour and management forum next week, which will kick-start the labour talks in earnest, with speeches by Tokura and Yoshino, who will underline their resolve to seek higher wages.