Japan Inc to announce modest wage increases after annual negotiations

Office workers wearing protective masks walk home during the spread of the coronavirus disease (COVID-19), at a train station in Tokyo, Japan, June 24, 2020. REUTERS/Issei Kato

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  • Blue-chip companies to conclude annual ‘shunto’ pay talks
  • Salary hikes could exceed 2% but be less than the 3% sought by Prime Minister Kishida
  • Prime Minister counts on wage growth to boost wealth distribution
  • Inflation must rise along with wages to reach the 2% target
  • Wage hikes not enough to boost consumption – analysts

TOKYO, March 16 (Reuters) – Japan’s biggest companies have offered pay rises of around 2% or more as annual labor talks wrap up on Wednesday, a boost from the weak increase in the last year, but it is unlikely to revive demand in moribund countries. economy.

Prime Minister Fumio Kishida has pressured profitable companies to raise wages by 3% or more as part of his drive to spread wealth more widely and boost consumer spending.

Low wages remain one of the most pressing issues for the world’s third-largest economy, where businesses and households tend to hoard money instead of spend thanks to years of deflation. Large corporations’ annual wage increases set the tone for the rest of the economy and are therefore closely watched.

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This year, analysts are focused on whether companies will raise wages by 2% or more. Blue-chip companies last year offered their lowest wage increases in eight years, at 1.86%.

However, economists say any boost to workers and the economy will likely be offset by recent increases in fuel and food prices.

“Wage increases for fiscal year 2022 will exceed those of the prior year to around 2%. Nevertheless, our expectations for stronger wage increases are low due to weak earnings from demand-driven companies. domestic due to COVID-19 restrictions,” said Masamichi, an economist at UBS Securities. Adashi.

Kishida and Bank of Japan Governor Haruhiko Kuroda stressed the need for wage increases to meet the 2% inflation target, with the prime minister calling for 3% wage hikes, which Adachi called it “too ambitious”.

Automakers, which have a strong influence in nationwide wage negotiations, have already agreed to meet their union demands in full, including Toyota Motor Corp (7203.T) and Honda Motor Co (7267.T).

On Wednesday, major electrical machinery makers followed suit, with Hitachi Ltd and Toshiba Corp (6502.T) agreeing with their unions to raise wages by 2.6% and 2.5%, respectively, including an increase in the base salary of 3,000 yen ($25.36).

Chief Cabinet Secretary Hirokazu Matsuno promised on Wednesday that the government would create an atmosphere by “mobilizing all possible measures” for companies to raise wages.

“What is important is to firmly achieve wage increases in the circumstances of rising prices,” he told reporters.

The Rengo trade union confederation went so far as to demand a 4% increase. But, as always, Japanese companies remain cautious.

As Japanese companies sit on a record $2.8 trillion in cash and deposits, managers point to the Ukraine crisis, soaring oil prices, weaker yen and COVID-19 pandemic as reasons to save money.

“If the Ukraine crisis were to hit corporate earnings hard, it would incentivize companies to cut bonuses, which would cap wages,” said Yoshiki Shinke, chief economist at the Dai-ichi Life Research Institute.

“It’s hard to assume that shunto wage increases will help boost private consumption.”

Last year’s wage increases were hampered by the pandemic, further complicating the central bank’s desire to see sustained inflation of 2%.

Some companies are moving away from flat rate increases to a more varied approach to compensation. More are adopting merit-based salaries, rather than seniority-based salaries, to attract qualified talent.

This decision coincides with structural changes in the labor market. About 40% of workers are part-timers and contract workers, double the proportion observed in 1990, many of whom do not belong to unions.

Improving working conditions and minimum wages for these low-wage “non-regular” workers is also central to labor negotiations. Along with wages, labor productivity and work style reform are topics that will likely be discussed.

Japan’s economic growth has likely nearly stalled this quarter as coronavirus curbs and supply disruptions threaten to derail the country’s economic recovery, a recent Reuters poll of economists showed.

($1 = 118.3000 yen)

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Additional reporting by Shinji Kitamura; Editing by David Dolan, Jacqueline Wong and Kim Coghill

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