Japan’s top companies have agreed to their highest annual wage increases in seven years, delivering a boost to Prime Minister Fumio Kishida’s campaign for a “new capitalism” to help narrow the gap between rich and poor.
Big employers, including Toyota, Hitachi and Toshiba, raised wages amid a surge in the price of oil and wheat caused by the war in Ukraine that has pushed up the cost of everything from fresh food to energy. But only a handful of companies with Kishida’s target of a 3 per cent pay rise for workers.
After years of deflation, prices in Japan were already rising as a result of the coronavirus pandemic and economists predict that the country’s consumer price index will surpass 2 per cent next month.
Since 2000, real wages have risen just 0.39 per cent and South Korea now outstrips Japan in average pay, according to OECD data.
Manufacturers, including cars and electronics, offered to raise salaries by an average of nearly ¥ 2,000 per month, according to the Japan Council of Metalworkers’ Unions, the highest rise since 2015. Nippon Steel and NEC increased pay by about 3 per cent, while Hitachi increased wages by 2.6 per cent.
Shortly after his election victory in October, Kishida pledged to tackle inequality in Japan and redistribute wealth from companies to households, in what he described as a “new form of capitalism.”
“Management is more aware than usual of the need to invest in people,” JCM chair Akihiro Kaneko told reporters. Masakazu Tokura, chair of the Keidanren, Japan’s largest business lobby group, said that “the momentum for wage increases has been strong. I hope this will be a boost for companies considering wage hikes. ”
Toyota reached an agreement early into its negotiations with the union representing its workers, pledging to meet fully their salary and bonus demands. The company’s president, Akio Toyoda, thanked workers for their efforts despite uncertainties caused by the pandemic and global chip shortage that have crippled the car industry. Its rivals Nissan and Honda followed suit, agreeing to their unions’ demands.
UA Zensen, Japan’s largest industrial trade union that includes textile, commerce and restaurant workers, said an average rise of 2.55 per cent was met this year as of Thursday, with more than 70 per cent of its unions winning a pay increase for their members beyond 2019 levels.
“Managements are more tolerant of wage increases than previously expected, as many companies have recovered their performance last year and are willing to retain talent with higher wages,” said Hisashi Yamada, vice president of the Japan Research Institute, a think-tank .
He said that while it remained to be seen if the service sector and smaller companies followed suit, the move by big companies was the first sign of a cycle of wage increases amid rising consumer prices.
However, UBS Japan economist Masamichi Adachi said Japan’s recovery from the pandemic had been weaker than in the US and Europe, making the prime minister’s 3 per cent target for wage increases “overly ambitious”.