Article Source: https://mainichi.jp/english/articles/20230619/p2g/00m/0bu/032000c
Article:
TOKYO (AP) -- Wages are rising in Japan more than they have in decades, at least for some workers. But so are prices, leaving many people feeling they must scrimp more than ever.
In May, the consumer price index was up 3.2% from a year earlier, well above the central bank's target of about 2%. That's great news for policymakers trying to get the world's third largest economy out of the doldrums by keeping credit super cheap to spur demand and push prices higher.
But a government survey of companies with five or more employees found real wages, taking into account higher prices, fell 3% from the a year earlier in April, marking the 13th straight month of declines.
Ideas:
Wages might have increased, for some, but probably not for all and maybe just for those in large companies and for small and medium sized companies overall.
But even at large companies, with inflation inflation continuing to increase the overall average for wage increases is probably not keeping up with inflation.
Consumers or households are not going to continue to spend, as needed, for the economy to grow, as consumer spending is at the heart of any economy and even in Japan, consumer spending need to be robust enough for economic growth.
So most likely Prime Minister Kishida's suggestion that companies increase wage more than inflation has not happened exactly just yet.
Article:
Although all the major companies have raised wages this year, with large labor union members landing a 4% hike, the highest in 30 years, a quarter of small and medium-size businesses -- employers of more than two-thirds of all workers -- gave no pay raises, according to the think tank Tokyo Shoko Research.
"My wages haven't gone up at all," said Kyoko Sano, a salesclerk at a Tokyo department store.
Sano feels a bit of a jolt when a cashier rings up her purchases and angst when she checks out prices of her favorite cookies, potato chips, rice crackers and drinks. Prices have all jumped, and the usual discount offerings have disappeared. Her electricity bill keeps climbing.
Ideas:
Most likely the profits margins of most small and medium sized companies have been too small or too compromised over the past two or three years for any kind of wage increase even it they wanted to or were thinking about it.
Small and medium sized company employees probably makeup most of the wage earners in Japan, like most countries, as as result there could be a potential or an large increase in income equality between those who work for large companies and those who work for small and medium sized companies which will have a impact on the consumers spending and the economy overall.
The Bank of Japan might, and maybe so, that it needs to increase the key rate to curb inflation and the US strategy and increasing the rate hasn't exactly curbed inflation yet.
Article:
There's no point in buying things like body lotion in advance before their prices rise. Pretty soon you run out, and you end up having to go buy them, anyway. There's an expiration date on cosmetics," she sighed.
Japanese workers make less across the board than their counterparts in the U.S. and Europe. A graph comparing wages for the last several years shows the line for Japan going straight across from left to right. In other nations, including the U.S., they climb gradually higher.
Ideas:
Consumers in Japan might be cutting back on some items and or finding cheaper substitutes for that they need. The end result will be less consumer spending in the Japanese economy which of course means less economic growth.
Its not easy to compare countries and wages and each country as it own wage structure which might make it impossible to compare wages in each country. The work culture and society overall play big part of the wages.
For example, the US higher wages for CEO's and others might be expected to be higher than in the US which then drifts upward to others in the company.
While in Japan CEO wages are slight lower which might means wages will be slight less in Japan compared to the US overall.
Article:
Average pay in Japan is about three-fourths of the OECD average of about $51,000. Hourly rates for workers in many Tokyo service jobs average about 1,300 yen ($9.30) an hour, up from the previous 1,000 yen ($7.10) an hour. They're lower in most of the country.
So while a barista in New York makes about $22,500 a year, according to Intuit, one in Tokyo makes 2.19 million yen ($15,700), Economic Research Institute data show.
In theory, a vibrant economy is supposed to lead to higher prices and wages. But purchasing power has to keep up to sustain consumer demand. It's unclear that today's inflationary pressures, set off by the rising costs for oil and other commodities, will spur the sort of positive growth cycle Japan's been trying to achieve for years.
Ideas:
Again, its not easy to compare wages in New York as the wage structure and the cost of living in different in both cities.
But at the same time is important to realize just what is happening in different countries and different cities.
Economic growth and higher economic activity is needed but in Japan, its seems to have been depressed or stagnant for many decades.
It seems purchasing power has not kept up with inflation as maybe wage growth the past few decades haven't been as good as it should have been.
Article:
So far, the Bank of Japan has remained cautious, keeping the key interest rate that helps determine rates on mortgages and car loans at minus 0.1%, where it's stayed for the past decade.
Wages have languished since Japan's financial bubble burst in the 1990s, and the economy has stagnated. Employers held back on wage increases and risky investments but largely avoided mass layoffs, notes Hideo Hayakawa, a senior fellow at The Tokyo Foundation for Policy Research, an independent think tank.
The rigid structure of Japanese workplaces also tends to crimp efficiency and productivity, a factor driving improved incomes and profits, he said.
Ideas:
The Bank of Japan has used a different strategy compared to the US and the EU.Maybe the Bank of Japan feels its the best strategy for the Japanese economy at this time.
The economy may have stagnated since the 1990's but at least most Japanese companies have not followed western ideas of massive lay-offs when business conditions are not so good.
Yes, wages have not grown, that much, since the 1990's, but at least for the most part, Japan has remained stable with good employment numbers.
The rigid structure of the Japanese workplace is another story that is not going be solved that easily as it might take decade or more for efficiency and productivity to improve.
Article:
"The economy is gradually starting to move, but we don't know yet if things will work out so wage increases can continue into next year," Hayakawa said.
Some companies have started to raise wages, but the hefty raise new hires of Fast Retailing, which operates the Uniqlo clothing chain, got this year is relatively rare. In raising monthly pay to 300,000 yen ($2,100) a month from 255,000 yen ($1,800), the company said it hopes to retain talented workers and narrow wage gaps with employees in the U.S. and Europe.
"We believe we must transform into a highly productive company that can compete and win on a global stage," says Peichi Tung, global corporate communications manager at Fast Retailing.
Ideas:
The economy might be starting to move but the Japanese economy always seems to be in a start/stop mode meaning a quarter of growth and then a quarter of stagnation.
Fast Retailing has set the bar high for other companies and its doubtful if they can match what Fast Retailing as done.
But what it did is what many Japanese companies should be doing globally and domestically, is increasing wages as a strategy to get the best talent possible and or retain their current talent pool.
The challenge is that some companies can't or won't increase wages which means they might lose out on talent globally and domestically.
Article:
Prime Minister Fumio Kishida, wants the minimum wage to rise to 1,000 yen ($7.10) this year, up from 961 yen ($6.80), a key part of his "new capitalism" program. He also advocates giving tax breaks to companies that raise wages.
"Realizing a systematic rise in wages is a government priority," Kishida said.
Wages should rise as companies compete for a shrinking pool of workers in a country where the labor force is aging fast and the population is declining. The most recent data showed 128 jobs for every 100 job seekers.
Ideas:
Unfortunately, using South Korea, as an example, has increased its minimum wage over the past few years as a way to give part-time workers and service-type workers a living wage.
But the problem was many of the small and medium sized companies couldn't handle the required wage increases and had to lay-off workers, reduce the hours of workers ,and also move more toward automation instead of workers in the workplace.
So, the same scenario could happen in Japan where small and medium sized companies just can't handle the increased minimum wage and might reduce their staff, reduce the hours of existing workers and or move more into the automation of their stores such as convenience stores.
Yes, wages should be increased as a way to keep talent and get new talent, but some companies just can't do it, at this time.
However, if the Japanese government provides good enough incentives for companies that do increase wages, is it going to be enough to convince companies increase wages and hire new workers.
Of course there is always the debate of hiring talent from overseas but Japan seems to be reluctant to do it at this time.
Article:
But instead companies have sought to avoid raising costs by hiring women, students, retirees or foreigners, often on lower paying contracts that don't include the same benefits as those given to regular employees.
Even though Japan's "lifetime employment" system has begun to fray, workers still don't job-hop as much as in the West. Stable jobs and loyalty are valued more than jockeying for higher pay or promotions.
For now, inflation remains well below levels seen in Europe, the U.S. and other parts of the world and companies have been cautious about price increases.
Ideas:
There are positives and negatives to the work structure in Japan and of course in other countries too.
Perhaps what Japan has been doing with part-time worker,s woman, retirees, and foreign students has worked well in the past, as companies will do what is needed to maintain their profit margins and profitability.
Of course there are positives and negatives to any work structure, and Japan is no exception.
Lifetime employment, in Japan, has not been that prevalent in decades. Yes, it might be seen in some of the bigger traditional companies but not in every company in Japan.
Inflation is still less in Japan than the US and the EU but that doesn't mean its not noticeable or a challenge for Japanese consumers who are not use to inflation and higher prices.
And yes, companies have been somewhat reluctant to pass-on their energy and material costs to the next in the supply chain, including the final consumer, but they pass-on their cost now.
Article:
When Yaokin Corp. raised the price of a popular stick candy called Umaibo to 12 yen (9 cents) from 10 yen (7 cents) last year, it was the first increase in 42 years. In Tokyo, you can still get a hot bowl of ramen for about 1,200 yen ($8.50). A Big Mac costs 450 yen ($ 3), compared with about $5 in the U.S., although prices vary by state.
For tourists, the exchange rate of about 140 yen to the U.S. dollar means bargains. But companies that import raw materials and must pay higher prices for electricity and other necessities are being squeezed.
Nissin Foods Group raised the price of its Cup Noodle, citing soaring costs for wheat, palm oil, shrimp, meat and other ingredients, and for energy.
Ideas:
Prices are still relatively low in Japan compared to the US. And even though some seem to think Japan is a very expensive place, its easy to eat lunch and dinner at a low price and buy things in supermarkets and conbinis at a relatively low price.
For example a recent article and survey just came out that suggested food prices in Seoul South Korea were some of the highest in the world while in Japan and Tokyo food and supermarket prices were still relatively low.
Of course if you go the expensive hotels in Tokyo and or restaurants they will be expensive too.
Article:
"We have been devoted to offering good products at cheap prices," said spokesman spokesman Kazuki Tsurumaru.
But Nissin is also raising wages.
So is Kaike Grand Hotel Tensui, in western Japan's Tottori Prefecture.
Ideas:
Yes, prices are increasing in Japan and many companies can't keep their profits margins as is so they need to increase prices as needed.
But maybe de-flation while not really gone just yet, might still be relevant related to many products and services in Japan.
It might take some consistent wage increases to finally see the end of de-flation in Japan.
Even when wages go up, enough, where workers feel good about them, inflation might not be go away until consumers also see a decrease in overall inflation.
Article:
Only a handful of travelers have returned to the hotel after the pandemic, while costs of ingredients for food and electricity rates have soared.
"Our hot springs and gourmet regional cuisine are the best of what we have to offer," like fresh fish and crab, said its general manager, Yoshimi Tabuchi, who says he's recruiting new workers all the time and wants to hang on to the best of them.
"So we are raising wages," he said.
Ideas:
As inflation continues in Japan, consumers are going to spend less and only spend on what need or want.
Perhaps going to a resort, far from their home, might be too much for some consumers/travelers at this time.
Its going to take time for the Japanese economy, especially the services sector economy to get back to the pre-pandemic level of 2019.
It might take a year or two as wages increase and inflation decreases for the services sector to get back to the pre-pandemic level again.
Have a nice day and be safe!
