Major Japan firms offer large pay hikes in spring negotiations
Ideas
Its no surprise that major Japanese companies are meeting the wage hike demands of their labor unions as they have the needed resources to do it and of course they will eventually pass-on the wage increases, which are a cost, to the next in the supply chain including of course the final retail customer.
The challenge of course will be what are small and mid-size companies going to do, as up to 70 percent of all workers in Japan work for small and mid-size companies and not the large name-brand companies that always makes the news, as again, many of the small and mid-size companies just don't have the resources or even the profit margins to match what large companies are planning on doing.
And it's estimated that up to 90 percent or more of businesses in Japan are in the small and mid-size category and again not in the large company category.
Part of the challenge for small companies in Japan is that many of them might be suppliers to large companies and the large companies, while illegal, might tell the small companies if you increase the prices of the supplies we buy from you we might not keep you as a supplier.
So as such many small companies which might supply large companies are reluctant to try and pass-on their costs to the larger companies for fear of losing significant business contracts.
Back around the year 2,000 or sometime like that Toyota, as the story goes or is suggested Toyota decided not increase the wages of its employees as it wanted to be competitive with the up and coming Chinese firms. As such most or many other Japanese companies did the same thing and didn't increase wages, which might have been the beginning of the deflation era in Japan.
So most likely as Toyota is going to increase wages most likely most of many of the large companies are going increase their wages too. And the reason is, as there is a supposed labor shortage in Japan other companies don't want their existing employees quitting and moving to another company, so companies increase their wage as a way to keep their existing employees.
Only a company, with the financial resources like Toyota, can afford to pay the wage increase as listed and certainly the annual bonus of 7.3 months' pay, which many other companies except a few of the large companies can afford to do.
Of course many or most of the 90 percent of the small business in Japan just don't have the needed resources to pay the kind of wage increases that Toyota or even Honda can as they can only do so much, which means some or many of the employees who work at the small companies in Japan, potentially might be looking for a way to move to a larger companies that pays more.
Even though both Honda and Suzuki might not be able to really afford to give wage increases of 18,500 and 20,500 yen, they are weary of losing employees to Toyota or any other company as again there is a supposed labor shortage and companies just cant afford to lose talented employees, so they increase the wages as as way to try and keep their employees.
Nissan has been struggling ever since the Ghosn situation and hasn't been able to move forward and has to restructure for the last couple of year, even closing some of its plants in Japan and globally too.
At the same time, Nissan probably can't afford to give any kind of wage increase but it too is weary of losing employees to Toyota, Honda, or even Suzuki, so they try to give some kind of wage increase to try and keep their employees happy or try to keep a lot of them from quitting and moving to another company.
What is the reason that major Japanese companies are now giving hefty wage increases, when even three years ago most companies were not giving needed wage increases. Is it because Toyota has decided to give wage increases so everyone as usual is following the lead of Toyota.
Is it because of the headed suggestions of the Japanese government to increase wages due to the continued inflation situation in Japan that has seemingly stalled consumer spending.
Or is there another reason that is not fully understood as for whatever reason Japanese companies, after many years of not so good wage increases have finally decided, in the interest of society, to give wage increases that actually help their employees and not just looking out for stockholders if they are publicly traded company.
It must be remembered, that for a very long time, as suggested by other news and research articles, that many Japanese companies have been sitting on huge sums of cash and not using it when they could have used some of their cash holdings for increased wages hikes for their employees.
Part of the reason, as suggested again by research articles, that after the 2008 global financial crisis many companies actually became very risk adverse and were were very afraid to spend anything but just the bare minimum as some or many were thinking they might be next on the chopping block.
Mazda and JAL are two companies in the past that were near extinction, or at least near the point of not being that well off, but both have come back from the brink and now are maybe more solvent than many other companies, and they had no problem meeting the demands of their labor unions and were quick the agree to increases in wages for their employees.
The Japanese steal sector is not doing so well now as they are feeling the affects of increased competition from Chinese steal makers and as usual, unfortunately, sometimes Japanese companies are slow to respond or don't know how to respond to the competition, as as a resulted they are unable or unwilling to meet their union demand for needed wage increases for their employees.
Yes, there might be solid progress for some companies but are the wage increases going to be enough for all companies including the 70 percent of workers who work for the small and mid-size companies in Japan.
But unfortunately, its always good of course to be positive, but in a market economy growth and wealth distribution doesn't always spread to ever corner of a market economy or society, even though that might be the goal it rarely happens that way these days.
And again, while the large name-brand Japanese companies might be getting large wage increases and even large bonuses in May and Nov. its always a challenge for the small and mid-size companies, the non-regular and even part-time workers in Japan to get something that might resemble a living wage where they can actually pay their bills on time.
Unfortunately, small and mid-size companies in Japan just don't have the needed resources to give the wage increases that 70 percent of the Japanese workforce needs and of course they might not be satisfied with their wage increase and then not spend much of it in the Japanese economy.
The Bank of Japan of course is watching very carefully what is going on in the Japanese economy related to wage increases and inflation but at the same time is watching very carefully what is happening in the Middle East with the oil situation.
Japan is a resource-poor country and as such as to import much or all of its energy needs which means its subject to whims of global energy and oil prices which of course are not out of control, and as such could significantly affect what the BOJ does in the future.
A 5 percent wage increase might be good but will it help the average Japanese household begin to spend again or enough in the Japanese economy to increase economic growth. Consumers have to feel to good about their wage increases and if they don't feel its enough they are not going spend as needed to increase growth.
Japanese households or Japanese consumers, for the most part, have been known to be more savers instead of spenders like consumers in the US. So will Japanese households save their wage increase or spend some of it in the economy as needed to help economic growth.
Rengo has set good and noble goal of a 6 percent increase in wages but do the small and mid-size companies in Japan actually have the needed resources for a 6 percent wage increase as most of the small and mid-size companies might not have the profit margins needed to increase wages by that much.
So yes, up to 70 percent of the Japanese workforce works for small and mid-size companies and not the large name-brand companies in Japan which means, unfortunately, its possible that a larger portion of the workers in Japan are not going to see increases in their disposable incomes or their purchasing power enough to increase spending for economic growth in the Japanese economy.
Have a nice day!
