Large firms to raise monthly wages at fastest pace in 17 years

Rising wages are essential for Prime Minister Shinzo Abe’s campaign to shift growth into a higher gear and distance the economy further from 15 years of deflation.

For "rising wages" (2.6% is meager) to have an impact, the rate of taxation on those wages must stay the same, or go down. If the local, and national governments levy higher tax rates, then the net benefit of those salary hikes will be severely limited, if not negated all together.

PM Abe's approach of strong-arming privately held business to do what he wants is rather thuggish, and runs contrary to democratic, free market principles. A better, more fair way, would be to reduce businesses tax burden in exchange for higher salaries.

As stated in the article, not every company can afford to dole out more pay. Small businesses and start-ups are even less able to do pay their people more than they do.

PM Abe is so focused on making Abenomics work, he has not tried to get the economy growing again.

Agreed, sflp330. These are fundamentals true of any 1st world nation.

JapanGal. That`s if you are lucky enough to be making 1000 Yen per hour. My wife still makes less than that. And many people make even less than her.

so wages have risen 2.6% but the consumption tax 3%, so how is that going to make any difference to japanese spending!?

Strangerland: "Well, that's the trickle-down economics version of things. We'll see if reality reflects that theory or not. I'm skeptical."

For a change we are in agreement. I'm not going to hold my breath.

Wow, people making ¥1000 per hour will jump for joy when their wages go to ¥1026!

I'm fairly certain I did not make a "sweeping statement" in term of saying that this is good news in terms of the possibility of wage hikes.

Sensato -- nice back tracking. It is also "possible" that hell will freeze over. But, respectfully, this is a sweeping statement":

Now that the Keidanren companies have signaled their intentions, companies that don't raise wages will be viewed as sub-par, and that sentiment will be negatively reflected in their share prices and prospects for new business.

No equivocation present here: "that sentiment will be negatively reflected in their share prices and prospects for new business". So try to spin it any way you want, but it is still nonsense. The stock market rewards results, not "failure to do so will impact their image both within and outside the company". What parallel world do you live in?

Japanese corporations are notoriious for not keeping wage increases up with inflation or profits.

Japan still needs to do more to improve workers rights and fair wages to employees vs the long often unpaid hours they ate forced to work.

Big bosses of the top firms, LDP cronies, do what they can to prop up LDP policies and make their pal Abe look good and suck money from the rest of society at a record pace. The rest of Japan labors on and hopes for the best while taking home less money and paying more for necessities.

Any hike in wages is good news despite all the "experts" forecasting doom and gloom. I recall the grafitti on the walls of a toilet cubicle at my Uni library; "get your economics degree here" with a big arrow pointed to the toilet roll.

The majority of companies are either not raising or lowering wages. This is a publicity stunt as the majority of people work for small and medium-sized companies. Ask how many people earning 1000 yen an hour are getting raises...

Source : Someone very familiar with the situation working at HelloWork told me wages are NOT rising. None of the Keidanren companies will go through HelloWork to recruit but most smaller, lesser known firms do.

Japan with nearly 40 percent of part-time workers are about as flexible as you get. They work in poorly paid jobs for hourly rates. Benefits are all but non-existent. Moreover, people working part-time are less likely to marry and have children. If Japan is to solve its demographic problem, it will have to tackle the labour issue. Japan needs to narrow the gap between over-protected permanent workers and under-protected non-permanent ones. That coddling one section of the workforce does not serve Japan’s interests well. Simply making life less cushy for permanent workers is not likely to do any good on its own. The big push should be on improving the wages and conditions of temporary workers.It should be made far easier for them to migrate to permanent jobs and for workers of all descriptions to move more freely between companies.

to make sweeping statements like you have simply because the big guys are going in a certain direction ignores reality.

@jerseyboy

I'm fairly certain I did not make a "sweeping statement" in term of saying that this is good news in terms of the possibility of wage hikes.

I am only saying that because many (not most) mid-tier companies follow the lead of Keidanren members, these wage hikes (on average) by the majors suggest that the average wage hike by mid-tiers will also be somewhat higher than in previous years. That is at least a sliver of good news, and a pleasantly unexpected surprise that few anticipated six months ago.

Also, many unlisted companies will also feel some pressure to raise wages because failure to do so will impact their image both within and outside the company — meaning dissatisfaction among employees who see other companies giving hikes, a worse selection of new recruits from the labor pool, and other negatives.

We're getting a zero percent pay rise this year (and next year, and the year after that).

I'll believe it when I see it! Raising salaries for a small percentage of the workforce will only further increase the class gap and create even more poverty because the companies increasing their salaries will also increase the prices of their products and services. Japan needs to increase spending to get out of this economic slump, but increasing taxes for consumers and decreasing taxes for corporations is definitely not the way to go.

If Abe had ever been serious about raising wages, rather than manipulating the Yen and keeping Japan Inc running on taxpayer's money, he would have indexed pay rises into law for the 4 years following his 2012 election victory and changed the tax code for married couples.

Some gradient, for 4 years, along the lines of a yearly pay rise of 10% for those on an annual income less than Y3,000,000 a year, 7% for those on less than Y5,000,000 a year, 5% for those on less than Y7,000,000 a year and 2% for those on more than Y7,000,000 a year.

Personally I believe that this is needed for all the developed economies, since the trickle down effect and capitalism unrestrained has clearly not worked.

The influence of the Keidanren membership means that many mid-tier companies follow their lead, so this is good news in terms of the possibility of wage hikes.

Now that the Keidanren companies have signaled their intentions, companies that don't raise wages will be viewed as sub-par, and that sentiment will be negatively reflected in their share prices and prospects for new business.

Sensato -- nonsense. You are overlooking several key factors. First off, these 1300 or so firms are generally the ones who have benefitted the most from the weaker yen, because they are often large, export-oriented firms. So they can easily absorb this 2.6% increase, since the yen is down around 20% versus the U.S. dollar and they are flush with cash from record profits. Second, the "mid-tier" companies can only "follow their lead" if these larger companies, that many of them are suppliers to, allow them to pass on the additional cost of a wage increase, or consumers in Japan will. This may very well not be possible. Finally, your statement about "share prices" is ignoring the fact that the vast majority of Japanese K.K.'s are privately held -- not even traded on one of the exchanges. And these companies, many of which must import supplies/goods, are getting killed by the same drop in the yen athat the big guys are benefitting from. Respectfully, the Japanese economy is both apples and oranges, and to make sweeping statements like you have simply because the big guys are going in a certain direction ignores reality.

If you own a car in Japan, the falling oil prices could be putting more money in consumers pockets.

These wage rises are overdue given the piles of cash that many Japanese corporates are sitting on. Will be interesting to see how the decrease in working age people affects wages and salaries going forward.

Another aspect too was that I noted during my time in Japan how proud many people were about the lack of changing of companies, when in actual fact with people staying loyal to employers, employers have less incentive to pay well to retain staff.

'Rising wages are essential for Prime Minister Shinzo Abes campaign to shift growth into a higher gear...'

That is a very optimistic perspective implying the economy is simply using a motor vehicles primary gearbox to run at high speed by increasing wages, as motor vehicles come in such diverse types.

Since this analogy is said to be the Prime Ministers, I will follow through on the premise:

If the economy is likened to a motor vehicle, then the national economy is more like a truck.

Where shifting gears to high gear is normal for shifting heavy loads. It follows then, 'Quantitative Easing' [QE]^ is shifting the ratio of a trucks drive splitter to low gear, even though the primary gear is shifted to high.

As the value of the nation's currency has less buying power through QE, it is after all printing more money.

It also follows QE shifts lower to middle value real estate to lower real world values, plus every commodity exported, along with the real world value of everyone in Japan's income; internationally speaking.

Anyone who has driven a truck with a manual gearbox and drive ratio splitter will understand. Because shifting to a lower drive gear ratio while selecting a higher primary gear, implies a strategy for hauling a heavy load uphill.

Having said that, there are great differences between a Nation's economic system and a truck; and like all analogies this one is flawed also.

However Prime Minister Shinzo Abe is saying more about the Japaneses and global economy than anyone is willing to admit. As always it is up to the reader to discern what is being said.

^ for economically minded; QE, 'yield curve' or value of ..... going lower : http://goo.gl/jKxkcI

@Gary Raynor

Thanks for the information. Interesting - and 'deflating' :-/

currently, CPI is 0 in Japan

After checking some more, it isn't really clear what it is right now, but seems somewhere between 0.5 and 1.2 depending on who is, and how they are, counting. It's also not at all clear where it is headed...

Will have no impact. The majority of workers are still underemployed in part-time or temp postions with no benefits, and they will not see this increase. Mininum wage is still at horribly low levels. The government is trying to force inflation to make themselves look good at the expense of the little guy.

jsa-aerial

Does anyone here, have the percentage they employ?

Yeah, it's really shocking and looks like being one of those Japanese truths, where they are 'economical' with the facts. I can't find the percentage anywhere, although I can find the number of companies; about 1,200.

I suspect Keidanren like it like that because it blurs the actual disproportionate political influence they have, relative to the small percentage of the Japanese workforce they represent.

By a quick calculation I work out that they represent about 7% of the workforce and remember that for a majority of their members, around 40% of their workforce are contract workers who get no pay rise. Therefore we really are talking about 4% of the Japanese workforce.

Well, that's the trickle-down economics version of things. We'll see if reality reflects that theory or not. I'm skeptical.

So the big, rich companies are raising wages (by less than the increase in consumer prices, mind you)

Well, currently, CPI is 0 in Japan, so 2% raise is more not less. Things could change, indeed it could go negative again, but for the near/mid term, this raise should be net positive.

I think keidanren members are only something like 2% of all companies in Japan.

@Strangerland

Keidanren has 1,309 member companies. Although few in number, they represent most of Japan's largest and most influential corporations.

The influence of the Keidanren membership means that many mid-tier companies follow their lead, so this is good news in terms of the possibility of wage hikes.

Now that the Keidanren companies have signaled their intentions, companies that don't raise wages will be viewed as sub-par, and that sentiment will be negatively reflected in their share prices and prospects for new business.

So the big, rich companies are raising wages (by less than the increase in consumer prices, mind you) and we're supposed to be happy.

Yet the huge Abenomics-generated increase in consumer prices -- which itself being cooked by the Abe administration (because it doesn't include food) -- is being borne by everyone in Japan, whether they work for a Keidanren-connected company or not.

Thank your lucky stars that the price of oil has plummeted in the past year. Next time oil goes over $100 (which is Y12,000 now!), and the prices at the supermarket make another big jump, I shudder to think of what Abe has planned to take our minds off what his policies are doing to us.

I think keidanren members are only something like 2% of all companies in Japan.

Does anyone here, have the percentage they employ?

I think keidanren members are only something like 2% of all companies in Japan.