Prime Minister Fumio Kishida on Thursday called for wage hikes ahead of annual labor negotiations early next year as he seeks to achieve his policy goal of wealth distribution.
In a meeting of Japan's powerful business lobby known as Keidanren, Kishida said, "To distribute (wealth) by raising wages is to invest in the future."
The prime minister, who took office in October with the slogan of creating a new form of capitalism, sees accelerating wage growth in Japan as the key. He has been calling for an over 3% pay hike by companies whose earnings have recovered to pre-pandemic levels as annual shuntō wage negotiations end before the next business year begins in April.
Keidanren, formally known as the Japan Business Federation, does not plan to seek wage raises across the board or set a numerical target for member companies.
"What's important is for each company to consider (how much they can raise wages)," Keidanren chief Masakazu Tokura told the meeting attended by corporate executives who serve as the organization's councilors.
Manufacturers have staged a faster recovery than nonmanufacturers, especially service providers hit by antivirus measures, from the COVID-19 pandemic fallout.
For this year's wage negotiations, Japanese companies agreed to an average 1.78% pay hike, according to the Japanese Trade Union Confederation known as Rengo.
Keidanren is expected to draw up guidelines for its member companies in January before companies and labor unions begin negotiations.
Uncertainty over the new omicron variant of the coronavirus, supply chain disruptions and higher input costs have made companies cautious about the outlook.
Still, Japan's economic recovery is expected to become more "evident" next year with the waning of downward pressure from COVID-19, supply-side constraints and a boost from the government's new economic stimulus, Bank of Japan Governor Haruhiko Kuroda told the gathering.
Kuroda stressed the importance of investment in growth areas and in human resources via vocational education and training that would result in higher labor productivity. Companies that see labor productivity improve due to such investment tend to raise wages, the governor added.
"Currently, the macroeconomic environment is favorable for Japanese firms, in that they can increase their investment toward digitalization and decarbonization while taking advantage of the low interest rate environment and effectively utilizing accumulated internal reserves," Kuroda said.
With its 2% inflation target likely unattainable, the BOJ is expected to maintain its ultraloose monetary policy for an extended period. Kuroda has said higher prices should come with higher wages.
The shuntō negotiations come amid concern about the yen's weakness on the economy.
Kuroda acknowledged that the yen's weakness hurts the profits of companies relying on imports and households' real income but it has a "positive" impact on the economy as a whole. Exporters are among the beneficiaries of the currency's depreciation that boosts their overseas profits when repatriated.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.