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bankingMarch 17, 2023

Major Japan firms offer biggest pay hikes in decades

Major Japanese corporations including Nissan Motor Co and Hitachi Ltd on Wednesday agreed on their biggest pay raises in decades in annual wage negotiations after their labor unions requested wage hikes that match rising prices.

Nissan said it will increase monthly wages by 12,000 yen on average, the largest hike since fiscal 2004 when the current wage system was introduced. It will also offer annual bonuses worth 5.5 months’ salary as per its union’s request.

That follows the decision by Toyota Motor Corp, which has a strong influence in setting the direction of the country’s shunto pay negotiations every year, to offer its biggest wage hike in 20 years.

Honda Motor Co has also agreed on its largest base pay increase in more than 30 years.

“We are hoping to help create a better working environment,” Toyota’s incoming president Koji Sato said at a press conference, expressing hope that the automaker’s pay hike will spur vigorous labor-management discussions at other companies.

Major electronics firms are also providing pay raises demanded by labor unions including Hitachi which agreed to a 7,000 yen base pay hike, the biggest raise since 1998.

Among other large firms, Sapporo Breweries Ltd said last week it will raise its base wage by 9,000 yen, the biggest annual increase in 40 years.

Japan Airlines Co’s management offered last week to increase base pay by 7,000 yen, 1,000 yen more than the amount requested by the largest union among those representing the carrier’s employees.

Beef bowl restaurant chain operator Zensho Holdings Co agreed to give an average increase in its base pay of 7.7 percent, or 26,718 yen, a record hike for the company.

The hefty pay raises came as Prime Minister Fumio Kishida has called on the business community to increase wages to mitigate financial burdens on households hit by soaring prices of everything from food to gasoline.

Core consumer prices in Japan jumped 4.2 percent in January from a year earlier, rising at the fastest pace since September 1981. Inflation-adjusted real wages in the country fell for the 10th straight month in January, according to government data.

“We are seeing historic wage hikes. It looks like we are finally out of the zero base-pay increase phase,” said Saisuke Sakai, senior economist at Mizuho Research & Technologies Ltd.

“But it’s still not enough to compensate for rising consumer prices” as the pace of increase in base pay needs to catch up with that of prices to generate any significant impact on the economy, he added.

In a government meeting with representatives from the business community and the labor unions held for the first time in eight years, Kishida expressed hope that wage increases at major corporations trickle down to smaller companies.

“The government will do its utmost to pave the way” for wage increases for workers at small and medium-sized businesses and strengthening such companies’ negotiating power to pass on rising costs to their customers, Kishida said.

The pay hikes come after decades of stagnant wage growth in the country mired in deflation after the collapse of the bubble economy in the early 1990s.

According to data compiled by the Organization for Economic Cooperation and Development, the average wage in Japan rose 6.3 percent in 2021 from 1990.