Japan’s workers get major pay rise

Japanese workers have experienced a remarkable surge in their wages following a government call for companies to support employees grappling with soaring prices. Official data reveals that wages in May rose by 1.8% compared to the previous year, marking the fastest pace in 28 years. However, even with this increase, people’s purchasing power continued to decline in real terms when accounting for inflation.

Inflation has been on the rise in Japan, the world’s third-largest economy, for over a year. The easing of pandemic restrictions and the conflict in Ukraine, which drove up the costs of essential goods like oil and wheat, contributed to price hikes worldwide. In Japan, the depreciation of its currency also pushed up the prices of everyday items.

The latest official figures indicate that core consumer prices in Japan increased by 3.2% in May compared to the same month the previous year. For decades, Japanese salaries had remained stagnant due to almost non-existent inflation.

In March, as the cost of living continued to surge, Prime Minister Fumio Kishida urged employers to take action. In response, companies such as Fast Retailing, the owner of the fashion chain Uniqlo, and automotive industry giants Toyota and Honda announced plans to raise employee wages.

Earlier this week, Japan’s largest trade union, Rengo, disclosed that companies agreed to the most substantial pay increases in three decades during annual labour talks. Research analysts from Japanese investment bank Nomura stated that these wage hikes represent a “symbolic structural change in the Japanese economy.” They added that the decline in Japan’s potential labor pool, which began towards the end of 2021, would exert sustained upward pressure on wages.

Fast Retailing, the owner of Uniqlo, expressed its intention to “appropriately remunerate each and every employee for their ambition and talents” as it raised salaries. The company aims to enhance its growth potential and competitiveness on a global scale.

Toyota CEO Koji Sato expressed hope that the move would have a positive impact on the entire Japanese automotive industry and foster open discussions between labour and management in each company. Similarly, rival car manufacturer Honda stated that the additional funds would primarily be allocated to younger employees, boosting their starting salaries.

Pan Finance is a print journal and news website providing worldwide intelligence on finance, economics and global commerce. Known for our in-depth analysis and opinion pieces from esteemed academics and celebrated professionals; our readership consists of senior decision makers from across the globe.

Contact us