Japan Business Lobby Calls For Wage Hikes: Updated on April 1, 2024.

 

Japan's biggest business lobby calls for larger pay hikes than 2023

Article Source:  https://mainichi.jp/english/articles/20240116/p2g/00m/0bu/050000c

Ideas:

The Japanese Business Federation asks for higher wage increases, but are companies required to follow the county's most powerful suggestion.

There might be many companies willing and able to give wage increases more than 4 percent but maybe not all companies can do it because of compromised profit margins.

But will 4 percent be enough to solve the inflation and stagnation challenge in the Japanese economy. Yes, companies can't do everything related to inflation and the stagnation in the Japanese economy, but it seems the Bank of Japan seems to be relying on companies to solve the inflation situation.

And then there is challenge of when companies do increase wages, they have to pay for the wage increases somehow, and most likely they will increase the prices of their products, which could in effect, be more inflation.

Real wages and consumer demand or consumer spending is the "real" economy in Japan and its not the Japanese stock market or big companies.

For the most part, most of the Japanese wage earners don't work for large Japanese companies, but small or midsize companies, and many of them didn't give wage increases in April of 2023.

Some articles, in recent years, have suggested, many large Japanese companies were sitting huge sums of cash and not using for capital investments and or wage increases for their employees.

In recent years, maybe it started during the lost decade of the 1990's, but large Japanese companies seemed to become risk adverse and didn't take risks like companies did in the 60's 70's or even 80's.

The Japanese economy, overall, is in a position, that it might be left behind among advanced economies if wage increases are not implemented, and not just by large companies but also by small and midsize companies too. 

Japan is in a position too, to become a second-tier advanced economy if changes related to wage increases are not implemented correctly this year and the next year too.

The Bank of Japan and the Japanese government can only do so much as most of the burden has to be on Japanese companies to lift the Japanese economy out if its current situation with large wage increases and again, all Japanese companies need to increase wages.

But the Japanese government should help small Japanese companies with subsidies, as needed to help with their profit margins and wage increases.

Productivity is lacking in many Japanese companies, as they are down the list of OECD countries and productivity. For too long Japanese companies have not sought improved productivity, maybe thinking it was too expensive or too hard to implement.

And again, the lack of productivity in the Japanese economy, might turn Japan into a second tier advanced nation, if it isn't already, if changes in productivity is not implemented.

Yes, companies should decide what's best for them related to wage increases as not all large companies are as profitable as some of the name-brand large Japanese companies.

For too long, many large companies, and maybe in Japan too, have too much market power, and as a result dictate to small and midsize companies prices for parts and so on that big companies need, at the expense of compromised profit margins of the smaller companies.

Unfortunately, even though its illegal, many large companies still have too much power over small and midsize companies when it come to parts parts prices that large companies need, and they have ways to circumvent the laws.

Maybe a 5 percent increase is good and needed but maybe many big companies might think its too much and instead might be thinking more in the 4 percent range.

Labor unions, globally, always set the demand higher than what they think they can get and then negotiate what might be more realistic after.

And this it a classic case of a labor union probably doing just that, as they know 5 percent is out of reach for what most big companies are going to give.

But you never know, as for example the Ford motor company in the US gave in to the demands of the labor union and met its wage demands after many weeks/month of strikes.

But of course Japan is a different culture and situation as labor strikes almost never happen in Japan as labor and management seem to work together more closely to solve the challenges both are facing.

Have a nice day and be safe!