Japan Wage Growth: Updated Dec. 27, 2024

 

Japan's wage growth likely to outpace inflation in FY 2024, 2025

Article Source:  https://mainichi.jp/english/articles/20241226/p2g/00m/0bu/031000c

Ideas:

If nominal wages do exceed inflation that might be a good sign for the Bank of Japan to consider increasing the key interest rate.

It might be the first time in many years that nominal wages has exceeded inflation, as Japan has been stuck in an inflation situation for a long time.

But it might be too early to tell as inflation in Japan keeps increasing or has kept increasing for many months.

It must be remembered that even though many large companies increased wages by at least 5 percent, up to 70 percent of Japanese workers don't work for large companies but small or midsize companies many or some of them didn't increase wages by that much. 

So its still quite possible that many Japanese worker's nominal wages are still less than inflation in Japan, which means their disposable income is not good enough to spend in the Japanese economy.

The Japanese government needs to find a way to help the small and midsize companies improve their profit margins so they too can give good wage increases to their workers.

A new report has suggested that Japan is like 22nd among OECD countries related to annual incomes and even South Korea has surpassed Japan, and they are last among the G7 countries.

Its a perplexing situation as to what has happened to Japan the last 30 years or so, when it was at one time one of the richest countries in the world.

Labor unions can demand wages increases all they want and even another 5 percent increase is good but are companies willing to do it again, and will small and midsize companies also increase wages by 5 percent or more and match what the large companies are going to do.

The government too can encourage wage increases but if many companies profit margins are too thin, there might be little chance for some companies to increase wages.

Some time ago, it was reported that many Japanese companies were sitting on huge sums of money and not using it for their workers. That might have been up to 10 years ago, and it might be the same today with some companies.

It has been suggested that maybe Japanese companies have transformed too much into western style companies as before Japanese companies used to take care of their workers, but the priority today is stockholders and stockholder value and not Japanese workers like it was many years ago.

Have a nice day!