Japan Company Wage Increases:

 Article Source:

 https://mainichi.jp/english/articles/20230315/p2g/00m/0bu/030000c

Article:

TOKYO (Kyodo) -- 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 ($89) 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.

Ideas:

A 12,000 yen increase in wages might be good for some but does it cover most of the increases in home energy and food costs. Some might say yes of course but some might say it its not enough. 

But a company, to be fair and honest, shouldn't have to pay for all of the inflation in an economy. 
Yes, a company should be responsible to help it workers as much as possible, but it's not a companies fault for increased inflation, and a company can't solve all of a societies ills with wage increases, but it does help.

Article:

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.

Ideas:

Toyota must be the market leader and whenever the market leader makes a move the followers tend to follow.

In this case as Toyota agreed to increase wages for the first time in 20 years, Nissan and Honda has followed up with wage increases too.

Big companies like Toyota, Nissan, and Honda can follow each other in wage increases but can smaller companies in similar industries do the same.

Its like families trying to keep up with other families. Wealthier families of course can keep up but what about other families and so on.

Article:

"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.

Ideas:

Creating a better working environment is good and probably needed and its good to keep talented workers or attract talented workers.

But is it enough. Today's worker want a better work/life balance situation and not necessarily more pay. More pay is of course a given but workers are looking for a better work environment. 

If Toyota leads the way and other companies see productive results in the labor/work negotiations, that might lead other companies to do the same thing.

Again a 7,000 yen increase might seem good but then again it might not be so good depending on how Hitachi's workers have had to pay for increased in home energy and food costs.

But something is better than nothing so maybe a 7,000 yen increase, for the electronics industry, is a good wage increase.

Article:

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.

Ideas:

All of these wage increases are very good for the workers, who might not have seen a pay increased in many years if not decades.

But who is going to pay for the increased wages. Do companies have enough extra cash sitting around to pay for the wage increases. Do they expect massive improvements in sales and revenue, or are they going to pass-on their increased labor costs to the next in the supply chain including the final customer.

A case in point in Japan Airlines and ticket prices. Ticket prices are high because of the pandemic and or less flights available and or companies such as JAL trying to make up for lost revenue during the pandemic. 

And now JAL has increased wages for the workers. Of course the JAL employees needs them or wants them but what about the customers and ticket prices in the future. 

Perhaps this is part of a shifting mindset in Japan away from the deflation era and since inflation and the pandemic companies are now passing-on their increased costs to the next in the supply chain including the final customers, which Japanese companies were reluctant to do for a long time.

Article:

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.

Ideas:

Again it all sounds good for large companies but what about small and medium sized companies. Can they compete with increases in wages or can they keep up with the so-called big companies.

If they can't there is the chance they are going to lose out on keeping or attracting talented workers in the future.

Prime Minister Kishida has good intentions but again what about small companies that just can't afford any kind of wage increase because of material cost increases and or energy cost increases.

This could potentially cause a rift or divide among companies in Japan. Japan for a very long time has has a somewhat equal playing field among small, medium, and large companies in that their somewhat of balanced economy among all companies 

But the wage increases could create a group of haves and have-nots among companies in Japan where talented or new workers only want to work for the large companies that provide the best pay with the best benefits.

Article:

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.

Ideas:

Core consumer prices have been increasing for months, ever since the pandemic started and this is no surprise.

Inflation-adjusted real wage also have been hit hard since the pandemic and again this is not a surprise.

What is a surprise, but not really, is how long it took for Japanese companies to begin to increase wages. 

Of course companies have been hit hard too with increase in energy costs, increases in material costs and or course in service sector huge losses in sales and revenue during the pandemic.

What Japan might be moving out of is again, its deflation might set or not passing on costs as needed as costs keep increasing. 

Article:

"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.

Ideas:

There might be a lag-effect meaning as wages increase it take some time before consumers/workers begin to use or spend their wage increases as maybe at first they might pay off some debts, they might save some, and then they might begin to spend it in the economy.

And yes, maybe some wage increases are still not enough or is not enough to cover all of the inflation that households have experienced the past two years.

Again for those working for large companies maybe the wage increase will be enough but maybe not for those working for small and medium sized companies.

Article:

"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.

Ideas:

It's good that Kishida will attempt to help small and medium sized companies, but just how is the Japanese government going to do it.

Japanese companies for a very long time were reluctant, even apologizing, for any price increase or the passing on of costs to the final customers.

Maybe those days are gone as the past two years companies have had no choice with profit margins constantly being lessened because of energy and material cost increases, and of course for some constant losses in revenue and sales.

Article:

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. That compares with more than 50 percent increases in the United States and Britain during the same period.

The average wage in Japan for 2021 stood at $39,711, about half the level in the United States, which marked the highest compensation. The figure in Japan was also the lowest among other Group of Seven industrialized nations.

Ideas:

It's not fair to compare wages from country to country and each country has its own structure and it own economic identity.

But at the same time wage increases of just 6.3 percent might not have been good for the Japanese worker who haven't seen wage increases for a very long time.

While in the US wages and or salaries of the top executives compared to the average workers is/was out of control, while maybe not so in Japan.

Article:

To bridge the gap with higher wages overseas, some companies have moved to introduce drastic measures.

Uniqlo clothing chain operator Fast Retailing Co. said in January it would raise the annual salaries of its domestic employees by up to 40 percent to retain talent.

Ideas:

For some, such as Uniqlo employees it might be good but also at the same time, whether positive or negative it could cause a shift or divide among companies and future talent.

Uniqlo might be able to attract better talent but what about a lesser known companies in the same industry that can't do the same thing with wages as Uniqlo can do.

And what about prices, what is Uniqlo going to do related to their profit margins and are they going to pass-on their wage increases to the final customer.

Yes there are positives and negatives here, as maybe the Uniqlo deserve wage increase and maybe customers might see some prices increases in future, as time will tell as with JAL and its wage increases.

Have a nice day and be safe!