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The government has unveiled a policy package to ensure that smaller companies will be able smoothly reflect labor costs and material costs in their transaction prices.

The policy package was released Monday at a meeting of related ministers, representatives from three major business organizations and others.

By beefing up surveillance against companies placing orders at unfairly low prices and other measures, the government aims to promote an environment that allows smaller businesses to raise their wages, to achieve a virtuous cycle of economic growth and wealth redistribution, a key goal upheld by Prime Minister Fumio Kishida.

Related government ministries and agencies will make all-out efforts for the measures every year in the intensive January to March period before the shuntō spring wage talks.

The government has asked business associations and industry groups to give consideration to reasonable profits for subcontractors and accept talks on raising transaction prices.

"We ask you all as leaders of industry circles for help," Kishida said at the meeting.

Smaller companies in Japan have faced a situation in which they are unable to pass on higher labor costs and materials prices to their transaction prices as they are in a weak position compared with large companies, their clients. As the failure to pass over higher costs pressured the smaller companies' profits, the situation is considered one of the reasons why moves for wage hikes did not spread among such businesses.

The policy package was released by Japan's Fair Trade Commission, the industry ministry, the labor ministry and other bodies.

The FTC and the Small and Medium Enterprise Agency will set up a website for companies to report abuses of purchasing power anonymously.

They will release case examples by June next year and ask industry groups to conduct voluntary inspections for sectors with many violations. They will also conduct on-site inspections of suspected refusals of proper price hikes.

Companies will be informed that unjust refusal to accept price pass-throughs may constitute an abuse of dominant bargaining position under the antitrust law or a subcontract law violation.

The FTC will establish a new division specializing in the issue.

Labor standards inspection organizations will provide further guidance and supervision to companies that are suspected of paying wages below the minimum or failing to pay wages or overtime.

The organizations will alert the FTC if they find any suspected cases of beating down prices when they conduct on-site inspections.

On the other hand, companies that proactively raise wages will receive additional points for their evaluations when bidding for public projects from the next fiscal year.

Companies, however, have reacted coldly to the government's measures.

The automobile industry, which covers a wide range of companies, has survived soaring material prices through cost reduction efforts.

"Individual negotiations matter the most in the end," a senior official of an auto parts manufacturer said. "I don't think (the situation) will resolve itself easily even if the government takes the lead (to encourage wage hikes)."

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