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Key firms agree to hike pay scales

Abe campaign to end deflation starts paying dividends

Kyodo

Many major firms notified their labor unions Wednesday that they will raise pay scales to conclude this year’s spring wage negotiations, responding to strong calls from the administration of Prime Minister Shinzo Abe to help end long-standing deflation.

Toyota Motor Corp., which has huge influence over other companies, will raise its average monthly pay scale by ¥2,700, while Honda Motor Co. is planning a ¥2,200 increase.

Likewise, six major electronics firms, including Hitachi Ltd. and Panasonic Corp., will raise their wage scales by ¥2,000 per month, the highest on record for the sector.

Although management in many of these companies failed to fully meet labor unions’ demands, these will be the first hikes in six years, reflecting significant improvement in their business performances partly stemming from the yen’s weakness, which benefits exporters.

A pay scale hike involves uniformly lifting a company’s basic wage other than a seniority-based regular wage increase. It often results in a rise in labor costs, as pension benefits are calculated based on the basic wage.

Realizing wage hikes is considered a key for success of Abe’s economic policies dubbed “Abenomics,” which aim to bring about a “virtuous cycle” of increases in corporate earnings, wages and consumption to conquer nearly two decades of deflation.

Some companies plan to fully accept labor unions’ demands over annual bonuses, while Nissan Motor Co. will also raise the monthly pay scale by ¥3,500 to fully satisfy the demand.

The moves are thanks to the administration’s rare and strong calls on companies to hike wages. Unions have seen some success during negotiations in this year’s “shunto” spring pay talks, with many of them winning a pay-scale increase.

“This will be a major driving force for our country to exit from deflation and achieve economic revival,” economic and fiscal policy minister Akira Amari told reporters, adding the response of management was “beyond expectations.”

Hiromasa Yonekura, the head Keidanren, the nation’s most influential business lobby, said the move by major companies is a “result of firms sharing recognition that (a wage increase) is needed to overcome deflation and realize a virtuous economic cycle.”

The focus now shifts to whether such moves will spread to medium-size and small companies as well as nonregular workers, a development considered necessary if the economy is to withstand a possible downturn in demand as a result of the consumption tax hike that is coming April 1.

On top of manufacturing companies, many firms in the service industry will raise wages, with convenience store chain Lawson Inc. moving to increase its pay scale for the first time in 12 years after agreeing to fully meet its labor union’s demand for an average pay scale hike of ¥3,000 per month.

Meanwhile, Suzuki Motor Corp. decided to forgo a pay scale hike due to concerns about the business environment, including the uncertain outlook for emerging economies.

Struggling electronics makers Sharp Corp. and Pioneer Corp. will also skip a pay scale increase as their labor unions refrained from submitting demands, effectively withdrawing from the unified labor talks of major electronics companies.

In addition to export-oriented manufacturing firms that benefit from a weak yen, nonmanufacturers such as restaurant operators and retailers, which enjoy brisk business thanks to robust domestic demand, will raise their pay scales. This will help mitigate the adverse impact of the consumption tax hike, said Koya Miyamae, senior economist at SMBC Nikko Securities Inc.

“The government now needs to promote a growth strategy, including a corporate tax cut as well as tax breaks to support families with children, in order to prevent a further decline in population and bolster domestic demand,” Miyamae said.

At a news conference in Tokyo, labor leaders welcomed the pay hikes, saying unions were able to meet their goals to a certain extent.

“We considered (the wage hikes) as a concrete step for pulling Japan out of deflation and realizing a virtuous economic cycle,” said Yasunobu Aihara, president of the Confederation of Japan Automobile Workers’ Unions.

  • Ron NJ

    An extra 2000 yen per month will certainly offset the 5-10% price increase in basic foodstuffs that has occurred over the past half-decade while wages have been stagnant and more and more people have been shuffled from full-time employment to dispatch and part-time work. How gracious of you, huge corporations that are raking in cash hand over fist thanks to the strong yen and literally unimaginable amounts of unpaid overtime put in as some perverted matter of national pride by the workforce at large! Proof that trickle down economics works, everyone, here you have it!

    • phu

      Ha, indeed. My only addition would be that hopefully it’s a start and not just a quick concession to curry favor… though, not being an optimist, I won’t be holding my breath for further hikes or workplace reform.