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The annual wage negotiations, held amid deflationary conditions, reached a climax Wednesday. Most major manufacturers, including automakers and electronics makers, agreed to resume “teiki shokyu,” a periodic wage increase (based on age or years of service) that was frozen last year due to the recession. But they did not raise basic pay, and many major manufacturers refused to fully meet unions’ demands for bonuses.

Although the periodic wage increase will have a minor impact on domestic demand, deflation will likely continue. In view of the nation’s economic difficulties, the Japanese Trade Union Confederation (Rengo), Japan’s largest labor organization, had given up seeking an increase in basic pay. Instead, it concentrated on securing the periodic wage increase. Apparently, management opted to restore the periodic increase to preserve workers’ morale. The results of the negotiations have helped the labor unions save face.

Strong demand in China and other Asian countries has helped increase Japan’s automobile and other exports. But demand remains low in the North American and European markets. Electronics makers are also facing serious competition from emerging economies like South Korea.

More than half of Japan’s major electronic makers expect deficits in the current business year. The prospects are poor in particular for firms that rely mainly on domestic demand. In Japan, supply is believed to exceed demand by ¥30 trillion.

The labor ministry has found that average annual household income has declined by about ¥1 million in the past 10 years. Only 80 percent of graduating university students and only 74 percent of graduating high school students have jobs lined up. Management should not forget that investment in human resources is the key to future growth.

Labor can do its part by pushing management to improve the working conditions of irregular employees.

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