Japan’s back-to-back wage bonanza would open door for BOJ exit By Reuters


© Reuters. Female office workers wearing high heels, clothes and bags of the same color are seen in a business district in Tokyo, Japan June 4, 2019. REUTERS/Kim Kyung-Hoon


By Tetsushi Kajimoto and Kentaro Sugiyama

TOKYO (Reuters) – Japan’s big employers are expected to follow this year’s bumper wage hikes with a new round of wage hikes in 2024, which are expected to help boost household spending and give the central bank the conditions it has need to finally return to massive monetary stimulus measures.

Early indications from businesses, unions and economists suggest that the labor and cost pressures that set the stage for this year’s wage hikes – the largest in more than three decades – will persist ahead of key salary negotiations in the spring of next year.

The boss of major drinks maker Suntory Holdings Ltd, for example, plans to offer his employees average monthly pay increases of 7% in 2024 for the second year in a row, in order to retain talent in a tight labor market and to compensate for the rise in inflation.

Meiji Yasuda Life Insurance Company plans to raise annual salaries by 7% on average for around 10,000 employees starting next April, while electronics retailer Bic Camera is expected to raise salaries for 4,600 full-time employees up to ‘at 16%.

“What is happening is a big paradigm shift from deflation to inflation,” Takeshi Niinami, CEO of Suntory Holdings, who also sits on Prime Minister Fumio Kishida’s top economic advisory council, told Reuters.

“Given the rapidly changing landscape, I think those who move quickly (by increasing salaries) should become competitive.”

The announcements come as Kishida puts pressure on businesses to raise wages to compensate for households’ suffering from the rising cost of living.

The consecutive annual wage increases would also provide Bank of Japan Governor Kazuo Ueda with one of the preconditions he needs to dismantle the extreme monetary stimulus of the past decade: sustainable wage growth.

“The combination of a chronic labor shortage and stubborn inflation will cause next year’s wage negotiations to result in wages the same as, or even higher than, this year’s,” Hisashi Yamada said. , labor expert and professor at Hosei University.

OECD data shows that average wages have barely increased in Japan for about 30 years, with chronic deflation and prospects of prolonged weak growth discouraging companies from raising wages.

The trend began to change after supply constraints caused by the pandemic and the war in Ukraine led to a sharp rise in raw material prices, forcing companies to pass on higher costs to consumers.

As inflation remains above the 2% target set by the BoJ for more than a year, companies face unprecedented pressure to compensate their employees with wage increases in order to retain and to attract talent.

A demand this year by Rengo, Japan’s largest labor confederation, for pay increases “of around 5 percent” resulted in average pay rises of 3.58 percent at large companies. Rengo said he would demand a wage increase of “5 percent or more” next year.

Another major union, UA Zensen, which represents service sector workers and part-time workers, said it would demand a 6% wage increase next year, matching this year’s demand .

According to a Reuters poll, six in ten economists expect wage increases at large companies in 2024 to be higher than this year.

“A combination of inflation, labor market tightness and corporate profits will provide a tailwind to maintain the momentum of wage increases,” said Atsushi Takeda, chief economist at China’s Institute of Economic Research. ‘Itochu. “More companies are also able to pass on higher supply chain costs.”


While raising wages has been an elusive goal for Japanese policymakers for decades, recent cost-of-living pressures have made the task even more urgent.

With his popularity plummeting, Kishida has pledged to deliver another year of strong wage increases and avoid the economic stagnation that Japan experienced in the late 1990s and early 2000s.

The Prime Minister last week called on the business community to exceed this year’s wage growth in 2024.

Kishida has proposed subsidies and tax incentives to companies that make bold wage increases and plans to allow loss-making SMEs that don’t pay taxes to benefit from tax breaks later. The Prime Minister also aims to give SMEs more bargaining power in negotiations with larger clients.

Another year of solid wage growth would also help the BoJ end its controversial monetary stimulus measures. Markets are betting the central bank could end negative interest rates by around April, when it has more clarity on wages.

The Bank of Japan’s quarterly Tankan business survey in December and wage negotiations between Japan’s biggest business lobby and Rengo in January could offer even earlier clues.

The key, however, would be whether the wage increases would extend to smaller businesses and those in regional areas.

A report released in October by the heads of the BoJ’s regional branches warned that wage increases remained uneven across sectors, with many companies undecided about next year’s pay rises.

In Saitama Prefecture, north of Tokyo, Nitto-Seimitsu Kogyo Co., a small maker of tools for auto parts that employs 113 workers, is raising wages by about 2 percent each year, but won’t be able to pay more.

“I want to further increase the salaries of our employees to help them cope with high inflation, but 2% is our limit,” said factory boss Keita Kondo.

(This story has been corrected to remove erroneous reference to salary increases awarded to 7,000 employees in 2024, in paragraph 3)

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