Japan Small and Midsize Business and Wage Increases: Updated January 8, 2025.

 

Small, midsize firms crucial for Japan's wage hikes: business chief

Article Source:  https://mainichi.jp/english/articles/20250107/p2g/00m/0bu/028000c

Ideas:

Small and midsize firms, which employ about 70 percent of Japan's workforce might be suppliers to larger Japanese companies and as suggested they fear they might lose customers or contracts as the larger firms might not like smaller suppliers passing-on their costs to the larger firms.

Japan has a labor shortage now, and small and midsize firms might not have the resources to pay the wage increases needed to keep workers or even higher new workers.

Part of the problem might be the market power of larger firms that might keep the profit margins of small firms too small to change anything in the small firms favor, including again increasing wages.

Maybe most of the small and midsize firms would like to increase their wages to their workers but again, they might not have the resources or their profit margins are so thin, they might only be able to offer as much smaller wage increase compared to what the larger firms offer.

If the larger firms with their possible huge sums of money in the Japanese banks were to offer some of it to the small firms, which might be their suppliers, that would go a long way to helping the smaller firms and also help stimulate the Japanese economy at the same time.

If not the possibility of a two-tiered society of haves and have nots as maybe small and midsize employees won't have enough disposable income to spend in the Japanese economy.

It has been suggested that Japanese wage are some of the lowest among OECD countries and even up and coming South Korea has surpassed Japan in wages.

The real question is how did Japan get in this situation when at one time it was one of the richest nations among OECD countries.

Part of the problem might do back to the early 2000's when the Toyota group and its chairman said no wage increases this year, and as Toyota was the market leader and maybe the defacto leader in Japan among large companies so all large Japanese companies did the same thing and didn't increase wages and its been like that ever since.

The Japanese economy might have reached the so-called virtuous cycle level, but at the same time maybe not all Japanese companies or Japanese workers feel that their wages have improved enough to have enough disposable income to freely spend in the Japanese economy which is what is needed right now.

Its going to take more than just one large company to increase wages but a large number or small and midsize companies too to reach the level of wage increases so that their workers too can feel good enough about their wage increases to freely spend in the Japanese economy and get the economy back on track again.

If not, again, while the large company workers might feel good about their wage increases the small and midsize workers, again, are going to feel left-out and not spend as needed in the Japanese economy.

What is the answer to help the small and midsize companies? The answer is very complicated as government subsidies for small companies might help some but does the Japanese government have enough money to support 70 percent of the Japanese workforce.

At the same time, does Japan want to follow the Northern European model of socialism or remain a true market economy.

Have a nice day!