Japan PM asks firms to achieve larger pay hikes in 2024 than this year
Ideas:
Most likely, Japanese large companies will increase wages again, but to what level is not sure yet, Last year it was around 3.5% for wage increases.
The problem is with small and midsize companies who don't have much room in their profit margins to increase wages.
Small and midsize companies makeup around 70% of wage earners in Japan, so that is a significant different in wage increase in Japan.
If the they don't increase wages, there is the continued possibility of income inequality among big company wage earners and small company wage earners, and even more than what it is now.
The Japanese economy has been stuck in deflation and a stagnation mindset for many years if not decades.
At the same time, wages in Japan are some of the lowest among advanced nations, which used to be one of the richest, but ever since the asset bubble crash of 1989/1990 its been a downward spiral for the Japanese economy.
Some would suggest Japan grew too fast in the 1980's and never really recovered from the 1989 bubble crash.
When the economy is not doing good, and everyone notices and sees demand decreasing companies begin to cut prices and then at the same time, they don't increase wages for workers.
But the problem is its been going on for a long time with no real end to deflation at the present time, unless, of course Japan companies do significantly increase wages.
The real world of economics and business is not the stock market but the what ordinary people feel and how much prices affect their real lives.
Ordinary Japanese people have got to see and feel wages are affecting them in a positive way with more disposable incomes and also at the same time, decreased prices where they feel good enough to spend in the economy.
It seems the Japanese government and the Bank of Japan is depending on Japanese companies to get the Japanese economy growing again.
Its not a bad idea as wages increase along with a tax cut and a subsidy for low-income groups might help to spur economic growth.
But its got to be sustainable, and not just a one time situation that might give a small boost or spurt but its got to be more and long-term.
Inflation has been running higher than 3.99 percent or 3.00 percent, so many wage earners are still losing out as their disposable income might not be keeping up with inflation.
As a result, maybe, consumer spending is not where is should be in Japan, and might not increase much, even if wages increase in 2024, in April, as it takes time wage earners to see the affects of wages on disposable income.
Many large Japanese companies have been sitting on big increases in profits for many years, and some say since the 2008 global financial crisis, and up until April of 2023, many companies didn't increase wages that much, if at all.
And yes, small and midsize companies are not able to increase wages and or increase prices, for fear of losing too many customers.
Private consumption of consumer spending has always been challenging in Japan, as Japan is not a spending country like in the US.
For example, there is the idea of elderly being more prominent in Japan, as Japan is an ageing society, which might mean less spending among the older groups.
And then there is many in Japan who are not working real full-time jobs but contract jobs, with less benefits and also many working part-time jobs too. All of these groups tend to spend less than full-time large companies workers, which only make up about 30 percent of wage earners in Japan.
There needs to be a complete restructuring of the Japanese economy, to get more full-time full benefits workers, including more women in management positions before the Japanese economy can grow at its fullest potential again.
The Bank of Japan is nowhere near the point of normalizing its policy as the Japanese economy has, again, entered into recession, which is two consecutive quarters of negative economic growth.
Most central banks want to see inflation between 2 and 4 percent, as they feel that's a manageable level. but maybe the Bank of Japan wants inflation to be 2 percent and not 3 or 4 percent where its at now, as maybe too many income groups and Japanese households are too stressed out related to inflation.
In recent years, the Bank of Japan has stated or suggested that the Japanese economy is too weak to handle key interest rate increases like in the US or the EU, as maybe the side-effects of the increase in the key interest rate might be too much for many in the Japanese economy.
And again, as the Japanese economy has entered into another so-called recession, the Bank of Japan, most likely, will not doing anything in the near future, or maybe not much in the first half of 2024, until it sees positive growth in the Japanese economy, along with significant wage increases and increased consumer demand.
Have a nice day and be safe!
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