The result of the annual management-labor wage negotiations at major automakers and electronics firms, which set the trend across industries, appears to highlight the limitations of the Abe administration's four-year-old drive to urge export-led businesses benefiting from the weak yen under its watch to share their increased profits with employees in order to shore up consumer spending. Increases in the workers' base pay scale agreed on last week were smaller than last year's at most companies, reflecting the firms' caution over uncertainty in their business prospects.
While the continued wage increases are welcome, the raises do not yet seem robust enough to kick in the elusive "virtuous cycle" of higher corporate profits raising workers' wages, boosting consumer spending and in turn generating more business investments.
For the fourth year in a row, the Abe administration kept up unusual pressures on the major firms to raise wages for their workers — specifically calling on the businesses to ensure that their employees would get at least the same level of wage hikes as in 2016. Consumer spending, which accounts for 60 percent of the nation's gross domestic product, has remained weak even as the economy grew for four quarters in a row last year. Per-household spending in January fell 1.2 percent from a year ago for the 11th consecutive monthly decline. The administration's bid to bust the long-running deflation was increasingly in doubt as consumer prices slumped for months in a row.