Japan Inc expected to announce modest wage increases after annual negotiations

Office workers wearing protective masks walk home during the spread of the coronavirus disease (COVID-19), at a train station in Tokyo, Japan, June 24, 2020. REUTERS/Issei Kato

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  • Blue-chip companies to conclude annual ‘shunto’ pay talks
  • Salary hikes could exceed 2% but be less than the 3% sought by Prime Minister Kishida
  • Prime Minister counts on wage growth to boost wealth distribution
  • Inflation must rise along with wages to reach the 2% target

TOKYO, March 16 (Reuters) – Japan’s biggest companies are set to offer wage increases of around 2% or more as annual labor talks end on Wednesday, a boost from the very weak increase of last year which should not revive the internal market yet. demand in a dying economy.

Prime Minister Fumio Kishida has pressured profitable companies to raise wages by 3% or more as part of his drive to spread wealth more widely.

Low wages remain one of the most pressing issues for the world’s third-largest economy, where businesses and households tend to hoard money instead of spend thanks to years of deflation. Annual wage increases for large corporations set the tone for the rest of the economy and are therefore closely watched.

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This year, analysts are focused on whether companies will raise wages by 2% or more. Blue-chip companies last year offered their lowest wage increases in eight years, at 1.86%. Economists say any boost for workers is likely to be offset by recent increases in fuel and food prices.

The Rengo trade union confederation went so far as to demand a 4% increase. But, as always, Japanese companies remain cautious.

With Japanese companies already holding a record $2.8 trillion in cash and deposits, managers point to the Ukraine crisis, soaring oil prices, weaker yen and the COVID-19 pandemic as reasons to save money.

Last year’s wage increases were hampered by the pandemic, further complicating the central bank’s desire to see sustained inflation of 2%.

Carmakers, who have a strong influence on national wage negotiations, have already agreed to meet their union demands in full.

Some companies are moving away from flat rate increases to a more varied approach to compensation. More are adopting merit-based salaries, rather than seniority-based salaries, to attract qualified talent.

This decision coincides with structural changes in the labor market. About 40% of workers are part-timers and contract workers, double the proportion observed in 1990, many of whom do not belong to unions.

Improving working conditions and minimum wages for these low-wage “non-regular” workers is also central to labor negotiations. Along with wages, labor productivity and work style reform are topics that will likely be discussed.

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Editing by David Dolan and Jacqueline Wong

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