TOKYO — Prime Minister Shinzo Abe of Japan has been putting unusually strong pressure on his country’s businesses to raise workers’ pay, a crucial but still missing piece of his economic growth plans.
There have been repeated public appeals and a series of arm-twisting meetings with executives and union leaders — reminiscent, some analysts say, of a bygone era when Japanese governments guided the economy with a heavy hand.
On Wednesday, Mr. Abe’s aggressive intervention produced the most substantial results so far, as some of Japan’s most prominent companies announced their biggest pay increases in years. They include Toyota and other giants from the carmaking industry, as well as electronics makers like Panasonic and Hitachi.
“With the usual negotiations between business and labor, executives get stuck in a deflationary mind-set,” Mr. Abe said in Parliament, explaining the government’s decision to become closely involved. “I am counting on this progress to continue.”
Interactive Graphic | An Erosion of Pay
Wages are vital to Mr. Abe’s hopes of reinvigorating Japan’s economy. Household incomes remain roughly where they were 20 years ago. A tentative rise in wages last year was wiped out by increases in inflation and taxes, leaving the average Japanese worse off, and helping to drive the country into recession.
The country is only just recovering from that unexpected downturn. And a pickup in consumer prices — trumpeted by the government as a sign of renewed economic vigor — has stalled. Without greater increases in pay, Mr. Abe and his advisers fear that an already fraying campaign to stimulate growth, known as Abenomics, could disintegrate completely.
But some question whether the size and scope of the promised increases will be enough to create a virtuous cycle of consumer spending and economic expansion. They amount to a modest $25 to $40 a month and apply only to a privileged minority of the work force: full-time workers at the largest corporations.
Still, both business and labor groups expressed satisfaction with the outcome, saying they hoped that the pay increases would provide the economy some much-needed momentum.
“The government, our company and the union all want to contribute to putting the economy on a positive growth cycle,” Tatsuro Ueda, a managing officer at Toyota, told reporters at a news conference.
Yasunobu Aihara, chairman of the Confederation of Japan Autoworkers’ Unions, said, “We achieved a bigger increase than last year, so this is an important second step.”
The agreements came at the climax of annual talks between companies and unions that are known here as shunto, or spring battle. The custom — part seasonal ritual, part hard-bitten negotiation — has been around since the 1950s, but governments rarely play such a hands-on role.
Mr. Abe has been so involved in this year’s process that observers have labeled it “kansei shunto,” or shunto orchestrated by the government. Nobuo Ikeda, a prominent blogger, has called Mr. Abe’s approach “state socialism.” And some business leaders complain privately that the intervention infringes on their freedom and could endanger their long-term competitiveness by raising the cost of labor.
In addition to using his bully pulpit as prime minister to encourage raises, Mr. Abe has dangled the prospect of tax cuts for businesses, linking potential breaks explicitly to cooperation on pay.
“If companies raise wages solidly, and invest in facilities, the Japanese people will gladly accept more tax cuts,” he told a gathering of business leaders in January.
Mr. Abe’s policies are a big reason that businesses have more money than usual to distribute to their employees. He took office promising to reverse a rise in the value of the yen that had squeezed profits at companies like Toyota that do much of their business overseas in foreign currencies.
The yen has duly plunged, and companies are flush with cash as a result. According to the central bank, corporate cash holdings stood at 231 trillion yen, or about $1.9 trillion, at the end of December, the most on record and a more than 4 percent increase from a year earlier.
Now, companies appear to be returning the favor by sharing some of that extra cash.
Toyota agreed to lift baseline pay for its full-time Japanese workers by ¥4,000 a month, the most in 13 years. Added to regular increases linked to seniority, the average Toyota employee’s monthly pay will rise 3.2 percent, the company said, significantly above the rate of inflation.
Other large companies announced similar increases in base monthly pay. Nissan agreed to a ¥5,000 raise. Honda is lifting base pay by ¥3,400. A group of six prominent electronics makers, including Panasonic, Hitachi and Toshiba, announced raises of ¥3,000.
Economists say pay at companies like Toyota has long served a benchmark for other businesses. So more of Japan’s large companies are likely to follow in the coming weeks.
Many smaller companies, which often serve the domestic market, cannot afford the same level of increases. They have little to gain from the weak currency. Instead, they are getting crimped in the current environment by the rising cost of imported raw materials.
The shunto negotiations “are basically for large manufacturers, which benefited the most from the yen depreciation,” said Masamichi Adachi, an economist at JPMorgan Chase.
The overall effect, though, will move the needle.
Naohiko Baba, the chief Japan economist at Goldman Sachs, estimated that basic wages for all workers would rise by an average of 0.5 percent in the fiscal year starting in April, up from 0.2 percent in the current fiscal year.
Such increases may be small, but since inflation has slipped back to barely above zero, workers will still feel the benefits, he said.
“The income environment is therefore likely to clearly improve,” he said.
This entry passed through the Full-Text RSS service – if this is your content and you’re reading it on someone else’s site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers.
Powered by WPeMatico