• Kyodo

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Prime Minister Shinzo Abe on Wednesday asked business leaders to raise wages to spur consumption and mitigate the impact of next October’s planned sales tax hike, the sixth consecutive year he has requested such an increase.

“I would like to request a wage hike that will further cement the upward momentum of the economy,” Abe told business leaders at a meeting of the Japan Business Federation, the country’s most powerful business lobby, also known as Keidanren.

Abe said he would refrain from proposing a specific figure for wage hikes, but cited the average of 5 percent in 1989, around double this year’s number, as a target.

The prime minister made the request ahead of annual wage negotiations between management and labor unions that take place in the spring, with an eye on countering any slump in domestic demand predicted to come when the consumption tax is increased to 10 percent in October from the current 8 percent.

Last year, Abe urged business leaders to lift monthly salaries by 3 percent in fiscal 2018 to spur private consumption and fight chronic deflation. The decision to request a specific figure is considered rare for the country’s leader.

But many firms remained cautious about reducing their cash reserves to increase wages.

Major firms raised salaries, including pay-scale and regular wage increases based on workers’ age or length of employment, in last year’s spring negotiations by an average 2.53 percent, the highest since 1998, according to a survey by Keidanren.

The management of Toyota Motor Corp., regarded as a bellwether for other companies, decided in the previous wage negotiations not to disclose the amount of its base wage hike offer, reflecting a desire to avoid influencing other firms’ salary negotiations.

For the upcoming wage talks, companies will need to gauge whether to make any bold moves while giving consideration to the persistently uncertain outlook for the global economy, exacerbated by the trade friction between the United States and China and sell-offs occurring across global stock markets.

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