Japan ready for higher wages
by Guido Alberto Casanova

After 30 years of stagnant wages, trade unions’ demands have the support of the Kishida government, which called for a “new capitalism” during last year’s election. Carmakers agree, but most increases have come as annual bonuses rather than higher basic salaries. About 36.7 of the labour force, which involves part-timers or contract workers, will not benefit.

Tokyo (AsiaNews) – In Japan, March means shuntō (spring offensive), a period when unions and employers negotiate wages.

Yet, despite this long-established practice, wages for Japanese workers have remained flat in real terms over the past 30 years.

This year however, spring negotiations are taking place in a different climate than in previous years.

“Wages have not kept pace with the growth in productivity, and it is difficult to say that they have been distributed appropriately to workers,” said Tomoko Yoshino, head of Japan’s largest labour union association, Rengō.

Noting that the country’s wages are among the lowest in the developed world, she called on trade unions within the association to press for a more substantial wage increase aiming at an overall rise of 4 per cent.

Japanese Prime Minister Fumio Kishida and his government agree. During last October’s election campaign, he proposed a “new capitalism” that would make income growth the engine of economic growth.

To this end, the government has proposed new tax incentives to encourage companies to increase wages, this despite scepticism among some observers regarding the effects and impact of pay rises.

Higher inflation could boost demands by Japanese workers. After years of near-zero inflation, price rose by 1.1 per cent in 2022. Not huge, but enough to encourage unions’ demands, especially since last year’s increases were wiped out by higher prices.

The first sector to respond to the situation was the car industry, historically influential for shuntō negotiations. Toyota, Nissan and Honda have already agreed to unions’ demands for higher wages.

Electronics firms like Hitachi and NEC are still considering how to respond to union proposals and should have an answer this week.

However, increases announced so far are lower than expected; not so much in terms of total figures, since several companies have decided to substantially increase wages, but rather in the form, namely annual bonuses rather than higher basic salaries.

Given the uncertain world economy following the outbreak of the war in Ukraine, lump sum payments could be revised in the future.

Japan is at an extremely delicate turning point in its history. Most companies face labour shortages, and as the demographic crisis continues, small businesses are often forced to close.

Decades of deflation and laws that favoured life-long employment have contributed to a mindset against wage increases, despite record corporate profits in recent years.

The growing polarisation between workers with long-term contracts and those in the gig economy is another major issue. Presently, 36.7 per cent of the workforce (especially women) are part-timers or higher on short-term contracts.

Wage negotiations bring no tangible benefits to this vulnerable group. And regardless of Prime Minister Kishida's plans, ensuring that this group has access to greater socio-economic benefits will be one of Japan's great challenges in the coming decades.