Japanese companies begin to buckle as Abe pressures them to raise wages

Japan's Prime Minister Shinzo Abe

Japan Inc is running out of excuses in the face of Prime Minister Shinzo Abe’s calls for wage rises of three per cent or more.

The nation is having its best run of economic growth in a decade, stocks prices are the highest in 26 years and corporate profits are near an all-time high.

At the same time, the labour market, which is already the tightest among major economies, is only set to get tighter as the nation’s population both shrivels and ages rapidly.

And as annual negotiations with labour unions start to ramp up, there are signs that some big companies may be bending as Abe pushes for increases, though others are still expected to drag their feet.

Last year, the average increase among 312 major companies was 2.11 per cent before bonuses, according to labour ministry figures. Successive years of tiny, or even zero, wage increases may be coming to an end at some companies at least – which in turn could provide consumer spending and inflation with a welcome boost this year.

For example, Asahi Group Holdings plans to raise wages by three per cent at its beer-making operation and by 3.4 per cent at its unit that produces soft drinks.

Last year Asahi raised wages at its beer-making unit by 2.9 per cent. Data on wage gains at its soft drink unit was not immediately available.

Management’s thoughts

“This is a result of management’s thoughts about how we should treat our employees,” President Akiyoshi Koji told reporters at a reception for corporate executives to mark the start of the new year.

He denied that the move was influenced by the government’s request to raise wages, saying: “An increase in disposable income helps improve the economy.”

Some other companies are discussing whether to abide by Abe’s call.

“I want to debate this and do as much as possible to make sure disposable incomes rise,” Hitachi Ltd Chief Executive Toshiaki Higashihara told reporters at a new year’s reception.

“I approve of raising disposable incomes, because in the end this will improve the economy by raising consumption.”

Japan’s Economy Minister Toshimitsu Motegi said he is confident that the conditions are ripe for increases.