Positive Wage Hike in Major Firms

Major firms in Japan delivered answers to trade union’s demand of wage increase in the annual spring wage negotiation on Wednesday. Reflecting overwhelming trend of wage hike, most firms presented positive offer beyond the line of 5% increase, which Japanese Trade Union Confederation set for this year. This is in the highest level since 1994. It may affect the decision of Bank of Japan over its ultra-easy monetary policy or even the fate of Fumio Kishida administration. 

Major wage increase was seen in the steel businesses. Nippon Steel offered ¥35,000 (11.8%) of increase in the monthly basic wage, which exceeded union’s request of ¥30,000. Other firms such as JFE Steel or Kobe Steel fully approved the union’s request of ¥30,000 increase, marking new high.

 

Most firms producing electrical goods, including Hitachi, Toshiba or Panasonic, fully accepted the demand of their unions. Carmakers such as Toyota or Nissan also approved the demand of their union. Honda marked the highest since 1993. The answer beyond union’s demand was seen in restaurant businesses as Ohsho Food Service raised 8%, doubling union’s request.

 

However, 70% of companies in Japan are small or midsize enterprises. While major firms can distribute their profits to their workers, small or midsize enterprises cannot afford to raise their wages, because it is not easy for them to add cost on the price of their products. The price of products is decided under the leadership of major firms, forcing subcontractors, most of which are small or midsize enterprises, obedience to the decision of parent company. Adding costs on the price is the key to create positive circulation of economic growth.

 

It is speculated that there will be positive discussion in BOJ to remove its negative interest policy in next monetary policy meeting early next week. BOJ has been considering its policy change as watching the trend of wage negotiation. If the bank recognizes that its goal of stable price hike of 2% is achieved, it may shift its policy to raise the interest for the first time since 2007.

 

BOJ Governor, Kazuo Ueda, said in the Diet discussion that he would properly decide on the bank’s monetary policy based on the answers for the request of wage hike. One of the members of BOJ policy board admitted that there would be a situation for achieving 2% price hike.

 

Prime Minister Kishida aimed achieving wage hike beyond price hike within this year in his policy speech to the Diet in January. Economic growth can be the last hope for Kishida, who has been suffering from unpopularity over the handlings of slush fund scandal in Liberal Democratic Party. It is focused whether the wage increase helps Kishida maintain his administration.

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