Japan Wage talks: Updated Jan. 27, 2025.

 

Japan annual wage talks begin amid high hopes for sustained pay hikes

Article source: https://mainichi.jp/english/articles/20250122/p2g/00m/0bu/029000c

Ideas:

Japan wages, unfortunately, are much less than other OECD countries, so there is a definite need for Japanese companies to increase the wages, despite increasing wages the past two years.

While large Japanese companies will most likely increase wages of 5 percent of more, the challenge is going to be small and midsize companies who probably don't have the profit margins or the resources needed to increase wages.

The Japanese government needs to find a way to help small and midsize companies increase wages, as again, small and midsize companies just don't have the resources to increase the wages.

A wage increase of 6 percent sounds good but will Japanese companies agree to increase wages that much and will there profit margins allow that much increase and most important will stockholders agree to a wage increase of that much if they are publicly traded company.

If large Japanese companies agree to a 6 percent increase can small Japanese companies be able to match what large companies do, when they haven't been able to match large company wages the past two years.

Yes, in a market economy private firms drive economic growth, but sometimes they need a little help or push from the government to get them there, for example small Japanese companies might need a little help.

What the head of Rengo said was correct but unfortunately wage increases in Osaka, Nagoya, and Tokyo might be doable but can small and mid sized companies in the regional economies in Japan be able to match what the large companies in the metro areas do.

If the Bank of Japan does increase the key rate, will it be enough to prevent prices from rising sharply.

The idea is as the key rate increases it will discourage some businesses or households from borrowing and or reduce spending enough to prevent price increases as demand will decrease just enough that keep prices low.

As large companies have increased wages the past two years will they have the appetite to increase wages for a third year. And will they increase wages above the 5.58 rate of last year.

And yes, small firms have not been able to pass-on their higher cost to consumers and probably the main reason might be that many small and midsize firms are suppliers of large companies who might not want to have their supply costs increased which might be a limiting factor for many small companies in Japan.

While large companies might be able to absorb a loss of customers due to price increases, small companies might not be able to absorb the loss of customers.

Have a nice day!