Japan Company CEO"S Push For Wage Increases: Updated March 21, 2024.

 

Japan business chiefs vow to push for higher pay as PM pressures

Article Source:  https://mainichi.jp/english/articles/20240106/p2g/00m/0bu/015000c

Ideas:

Many major or large Japanese companies have been sitting on mountains of cash or large amounts of cash for a very long time and not using their cash for significant capital investments or wage increases for their employees.

The same can't be said for small and midsize companies, who maybe since the pandemic, have had profit margin challenges with increases material cost and the weak Japanese yen, which increases import prices.

Of course, if they do increase wages in April of 2024, most likely prices of their products will increase as a way to pay for the wage increases, as they try to maintain their profit margins.

Unfortunately, deflation is as much a mindset as it is an economic situation, and it might take a while for mindsets to change even though deflation has come and gone, as consumers and society has gotten used to lower prices.

Again, even though companies increased wages by 3.99 percent, many smaller and midsize companies might not have been able to do so, as most Japanese workers, up to 70 percent, don't work for large or major Japanese companies.

An increase in disposable income is important for many households to feel they have risen out of the deflation trap and they can feel good about spending again. But again, its going to take the cooperation of all companies in Japan, not just large companies, but small and midsize companies too.

In a market economy, its not the government role to help every company stay in business, but in this case, to get small and midsize companies to increase wages, the Japanese government maybe can provide some tax benefits or subsidies for small and medium size companies as an incentive to increase wages.

Maybe in years past, as many companies were not seeing wage increases among many firms, they too didn't feel the need to increase wages. But this year, maybe as companies see wage increases in the Japanese economy, maybe there will be a trickle down affect to smaller firms to also increase wages.

But then again, maybe not., as many small and midsize firms are struggling with profit margin challenges due to increased material costs.

There is no real obligation to increase wages but there might be a societal obligation as again, as companies see and hear of other companies increasing wages, they might feel the need to be cooperative and increase wages too.

Usually Japan is a group society, but in recent years maybe not so much as maybe many companies just do what the need to do and not really pay attention to what others do or what society wants or needs.

But this time, it might be different as maybe many companies might feel social pressure to increase wages as its in the news so much and Japanese workers maybe are expecting wage increases.

At the same time, new Japanese workers might be expecting wage increases and companies need to remain current or competitive with wage increases to get the best talent possible.

A 5 percent wage increase might be too much for some or many companies but anything more than the 3.9 percent from last year would be very good this year.

The Bank of Japan has already decided to change in current policy, as maybe they see or think wage increases are going to be significant enough this year, to maybe get Japan out of the deflation trap it is in.

As companies increase wages in April of 2024, it take some time before households begin to feel the affects of the wage increases and or for the Japanese economy to feel the affects of the wage increases. 

And then, eventually, there is going to be price increases as companies try to maintain their profit margins due to wage increases.

So in the summer or during Golden Week in May it will interesting to see if consumer spending increases or decreases due to continued inflation of if there is surge because of the April wage increases.

Have a nice day and be safe!