Japan Annual Wage Negotiations: Updated April 20, 2024.

 

Japan annual wage negotiations begin as impetus for hikes grows

Article Source:  https://mainichi.jp/english/articles/20240124/p2g/00m/0bu/020000c

Ideas:

Many Japanese companies might be willing to offer pay increases but maybe some are unable to meet the 3.99+ wage increases that the union is asking for. 

Especially small and midsize companies who seem to have more profit margin challenges than large Japanese companies.

The Bank of Japan thinking might be that key interest rate changes and other policy strategies are only short-term fixes and the bulk of what is going to help the Japanese economy is wage increases where workers feel good about their wage increase and begin spend again in the Japanese economy.

Only time will tell if wage increases can really help, as always there is a lag effect, and maybe by May and Golden Week, the week long holiday each year in Japan, there might be some real changes and there will be more consumer spending in the Japanese economy.

Again, a  wage increase of 5 percent or higher would be good for Japanese workers, but will companies agree to that much. And again, can all companies, large, midsize, and small afford to give a 5 percent + wage increase.

As usual, unions always start out with a higher number when begin to negotiate, and knowing full well companies most likely will not agree with that number, and the real negotiations begin to find compromise in the negotiations.

If and when companies do agree on a number, then most likely they will begin to increase prices on their products, as they need to pay for the wage increases.

Most likely, many small companies will be watching to see what large companies are going to do, and then the small companies will decide to match, if they can, or give an amount that doesn't compromise their profit margins, as smaller companies have thinner profit margins then larger companies and have less room for negotiations.

Japan is has been at risk  of stagnation for a very long time. And some would say, they have been in a stagnation period for a very long time.

The challenge is consumer spending is not as much as it should be for the 4th largest economy in the world, as Japanese consumers, for the most part, are not big spenders like US consumers.

In a market economy, government support for businesses need to be measured, as a government can't do everything. But in this case, support for small companies is good and needed to help them increase wages. 

Many small Japanese companies have compromised profit margins which prevent them from giving wage increases. But with the help of the Japanese government with subsidies it might be enough for many small companies to give wage increases to their employees.

Again, the Japanese economy has been in a deflation mindset along with a stagnation situation for a very long time.

Some might say, Japanese households, with wages that haven't kept up with inflation, have been in a deflation situation, with decreased purchasing power cutting into their wages.

Rarely do you hear the phrase "social duty" as maybe in some other countries or economies that phrase is never mentioned in relation to companies helping society with wage increases.

But maybe that has always been the underlying theme of business in Japan and the Japanese economy, and not so much a "win at all costs" mentality like in the west.

Unfortunately, in a market economy, there are always going to be some who gain, and those who fall behind, and Japan is no different, and all households are not exactly the same with some doing better than others, and deflation will remain for some in Japan for sometime.

If all companies begin to increase wages, there could be a real multiplier effect in the Japanese economy, meaning there might be a real surge in consumer spending in the Japanese economy, as consumers begin to see and feel others are spending too.

Again, Golden Week in Japan will be a real key to see if Japanese consumers are going to spend or are they going to hold on their wages increases and not spend.

If consumers decide to wait and not spend that could be a good sign, that Japanese households are not convinced the Japanese economy is headed in the right direction, and inflation is still a major distraction for many Japanese households.

Its seems, again like a multiplier effect, once other companies begin to see and hear what other companies are going to do with wage increases other companies will begin to do the same thing.

For example, if convenience store operator Lawson is going to increase wages by more that 5 percent, then maybe 7 Eleven, Ministop and others will do the same as a way to make sure that new employees will want to work for them with wages that are the same or more than their competitors.

And the same with other companies in other sectors, such as restaurants, hotel operators and so on and not just big name brand large companies in Japan.

Have a nice day and be safe!