Japan And Wage Increases: Updated June 27, 2024.

 

Japan seeks wage hikes, over 1% GDP growth as population shrinks

Article Source:  https://mainichi.jp/english/articles/20240612/p2g/00m/0bu/003000c

Ideas:

The Japanese economy and society has many pressing concerns these days, but so do many countries globally too.

There doesn't seem to be any easy solutions to Japan's challenges, and if there were, they might have been solved or lessoned by now.

Being one of the fastest greying societies, doesn't help with consumer spending and of course the inflation situation makes it more challenging for senior citizens in Japan or some of them, as they might be on fixed incomes.

Labor shortages is another major challenge for the Japanese economy. But for good or not so good, Japan could have tried to solve this situation much sooner with improved immigration policies, but unfortunately, Japan has been slow to implement much that helps the labor situation.

An inflation-adjusted growth rate of over 1 percent is needed to show or indicate improved consumer spending in the Japanese economy, as consumer spending it they key for any large advanced economy, but its been lacking in recent years in Japan due to continued inflation.

And especially as the birth rate in Japan, like other countries, continues to decrease more and more consumer spending is needed to help the social security system maintain its current level.

And yes, Japan's government debt to GDP is the highest in the world among advanced countries, but its not an easy situation to solve. Its like households who try to keep a budget but there are always situations and or emergencies that come up that keeps households from sticking to their budget, and the same with governments.

All plans are good, but in the end, with politics, things always change. Yes, there are good and needed intentions, but in the final outcome, what was originally proposed, usually is not the final product.

So, yes, the Japanese government knows and understands it needs to reduce the government debt, but can it really do it or will different political factions water-down the original idea to where the government doesn't really reduce the current debt situation.

But its the same with all governments, who make or have good plans but they get watered down by different factions within the government.

Short on details seems to be true of many different governments as they try to make the ideas as flexible as possible, but they don't really give any real detailed ideas how they are going to solve the problem.

Yes, a 2 percent inflation target is good and needed, and even more wage growth over the 2 percent inflation target by all companies is needed to ensure there is adequate growth in the Japanese economy.

Wage growth in the Japanese economy is very much needed, as the debacle, first started by the Toyota group in the early 2000's has slowed wage growth for decades and now Japan is trying to play catch-up and even the 2023 wage increase and the 2024 wage increase might not be enough to help the economy recover from many years of no wage increases.

If the Japanese government can easily solve the problem, now it would be good, but it seems the situation is very complicated and its going to take some time before all of the significant variables are in place to get the Japanese economy growing again.

Wage increases are the key, or one of the most important variables, but all companies have to play their part in giving needed wage increases, and not just large name-brand companies, but small and midsize companies too.

The other variable is inflation, and the Japanese government and or the Bank of Japan, has to find a way to decrease the current inflation below the wage level increases, so that Japanese households can feel good about their wage increases and again begin to spend in the Japanese economy.

When that happens, then natural inflation related to consumer demand and consumer spending will replace the cost-push inflation, which is related to companies/importers passing on their costs to the next in the supply chain.

Yes, a temporary fix, but a needed fix, as Japanese households have been hit with inflation ever since the pandemic period.

It might be good, if possible, but of course it might increase the debt, but two or three more 40,000 yen payouts would really boost the Japanese economy and might get people spending again.

Not to say anything not so good of the Japanese government, but its taken a long time for any action related to inflation and or subsidies, beyond the energy subsidies in the Japanese economy.

A minimum wage increase is very much needed in Japan, as it might be a boost to get more young Japanese students back to the workforce, as they seem have left many of the service type jobs/companies that rely heavily on minimum wages.

Japanese need the ability to move from one job to the other, as there seems to a difficulty in changing jobs in Japan. At the present time, Japan's workforce seems to be to rigid and or not very flexible to allow workers to easily change jobs.

For example, why should a Japanese worker need or have to use an agency to tell their current company they are leaving, as maybe they are afraid and or afraid of what the current company will say or do.

Automation and digitalization is good as long as it doesn't displace some current workers, who probably at this time worried about their jobs being replaced.

Japan. long ago, lost the war with semiconductor chips to South Korea and Taiwan, and even China, but only recently has it began to get back into the game, and it might take a few years before any significant change take place.

All of the above ideas are good and needed, but again, governments come up with great plans but sometimes, due to economic pressures, or governments needs in other areas, they sometimes are forgotten or take a long time to get started. Lets hope the Japanese government can stay focused and do what they need for the Japanese economy to grow again.

And yes, Japan needs to expand globally and just focus on China and the US, but all areas of the world, that might be new niche markets as more and more countries, middle class, keeps growing.

Again, it seems Japan has fallen behind related to chips and artificial intelligence, and even if they haven't the image of Japan falling behind seems real.

Yes, Japan is a resource-poor country, Japan needs some energy FTA's with energy producing countries so that that when the energy markets begin to increase prices Japan doesn't need to worry too much about the supply and demand related to global energy prices.

Nuclear power might still be a negative in Japan after the Fukushima situation, but despite that its still a cheap source of energy that Japan needs to find a way to use safely and correctly.

The Japanese government should keep the energy subsidies for a long time or at least until wage increases begin to take affect and Japanese consumers feel good about spending again.

Have a nice day and be safe!

BOJ View of Regional Economies: Updated April 7, 2024.

 

BOJ cuts view on 7 of 9 regional economies, notes strong wage growth

Article Source:  https://mainichi.jp/english/articles/20240404/p2g/00m/0bu/036000c

Ideas:

Just like a market economy, and different sectors, some better than others, the same with prefectures or states in Japan. Some might be doing better than others, which is normal in any market economy.

Of course private consumptions of consumer spending is normally not as strong in Japan as it is in the US, but the inflation situation has caused less spending than normal for this time of year.

And then add in weak auto production, which is a major economic driver in the Japanese economy. An economic driver is any economic activity that that increase economic growth significantly, and in this case auto production is a strong driver of economic growth.

The weak auto production situation might be related to the Toyota group and Daihatsu and their quality control challenges.

Hokkaido and Shikoku are relatively less strategic when it comes to Japanese companies and the Japanese economy, so there might not have been enough change up or down for them to be included up or down.

Of course the Hokuriku region of course will continue be downgraded due to the earthquake, and it might take some time, maybe a year or more for the region to get back to normal or near normal.

Nonmanufacturers or course are positive about what is happening in the Japanese economy, with hordes of foreign tourists coming to Japan and spending a lot of money, due to the weak Japanese yen, as foreign tourists have more purchasing power.

Manufacturing companies, large and small, are rarely that positive and their focus seems to be related to the global economy and maybe even what is happening in China, as China, at this time, is not where it should be economically.

Weather, warm or cold, of an extreme either way, seems to affect consumer spending, and in this case, a warmer winter reduced spending on winter clothes. Of course major retailers, like Uniqlo plan months if not years ahead, and they sometimes have no way of knowing exactly what the weather might be each summer or each spring.

They can of course make estimates, but based on normal weather expectations, which means maybe many clothing retailers had to have a lot of sales to reduce their winter clothing inventories.

The Toyota group, and Daihatsu which is a small manufacturer of the Toyota group, has had some quality control challenges and maybe even miss-representing it quality control data, and when it was discovered the Toyota group was forced to reduce manufacturing in some of its plants.

The Japanese economy might be recovering overall, but it seems like its constantly it a recovery stage and never seems to get past the recovery label into something better.

The key interest rate hike by the Bank of Japan, was probably not that significant, at this time, as they are not going to increase the rate too much because of possible side effect, which might hurt the Japanese economy.

All companies need to participate in wage increases including small and midsize companies for the Japanese economy to fully get to the 2 percent inflation level, away from inflation related to just companies passing on their costs to the next in the supply chain.

Services is the bright spot in the Japanese economy at this time, which is not usually the case as services were hit had during the pandemic and lost a lot of jobs due to layoffs and businesses closing.

The case might be made, that if Japan was not in a labor shortage situation, maybe some or many companies would not be offering wage increases to attract new or enough workers for their companies.

Core inflation might be in Japan for sometime and private consumption or consumer spending might be somewhat reduced for a while, unless of course many Japanese wage earners begin to spend some or all of the extra wage earnings, but that is not likely as most likely Japanese households will hold onto their extra income and use to pay for the basics such as utilities.

As the Hanami season is now in full bloom, and Golden week, the first week of May, which is week long holiday, their could be a surge in spending, but it remains to be seen if Japanese households will really spend a lot during the Golden Week period.

There is also the idea that once companies do increase wages, they need to pay for the wage hikes and most likely they will increase prices on their products.

And then there is the situation with small companies increasing wages, even though their profit margins might be compromised they might have no choice but to increase wages, to keep up with other companies or competitors in the same sector in terms of securing the best talent possible for their company..

Wage increases might not end the cycle of deflation, but its a good start, And then there is the idea of continued inflation that will replace deflation with price increases due to the wage increases. 

So a combination of continued inflation and wage increases, which will increase prices on some products, might move the Japanese economy from the deflation stage to the inflation stage in the future.

Have a nice day and be safe! 

Japan Government Report: Updated May 27, 2024.

 

Japan edging closer to ending deflation, pay hikes key: government paper

Article Source:  https://mainichi.jp/english/articles/20240213/p2g/00m/0bu/042000c

Ideas:

The idea that Japan is in a state of deflation might only be in the eye of the Bank of Japan and the Japanese government, as Japanese households and consumers might only see increased prices.

If you take real wages as the benchmark for deflation then yes, it might be correct as real wages keep decreasing while inflation keeps increasing.

But the average Japanese consumer or Japanese household doesn't think in economic terms they only think in how expensive everything has become and they could care less about economic indicators and such.

Yes, there might have been a time, when there was a period of deflation in the Japanese economy most likely due to decreased consumer or household demand and businesses were lowering their prices to keep customers and stay in business. 

But those days were long ago and not the past 5 or 10 years when inflation was the highlight of the Japanese economy.

And yes, since the Toyota wage negotiation incident around 2000 when they didn't increase wages and everyone else followed suit, wages and real wages are not increased very much.

Again, it's quite possible that wages for most workers in Japan have not increased since the the early 2000's as, again, most companies followed the Toyota example or no wage increases. 

And again, if you see real wages as the key indicator for deflation then yes, if wage increases. are not big enough to overcome inflation, then yes, there will be deflation again, in the Japanese economy.

But there is the ideas of constant inflation in the Japanese economy related to products and services then how then can you say there is real deflation in the Japanese economy.

Yes, the Japanese economy is not in a state of deflation even thought real wages keep decreasing and prices on most products in Japan keep increasing, so most likely Japan is in a state of inflation and not deflation.

But again, maybe the powers to be think of wages and real wages as the key indicator for the Japanese economy, and maybe to be fair, for good reason, as many if not most of Japanese workers haven't seen a wage increase for a very long time or maybe for some workers never.

Unfortunately, Japan, in terms of wages, is not even near the top or the top half of wages for OECD countries these days. Its been a long decline for when Japan was at the top in the large 80's but since then a slow decline in most things in Japan.

Japan is a resource-poor country and has to import much of what it needs. And of course the exchange rate between the US and Japan and Japan and the EU has made import prices even higher, which then means import companies pass-on their costs to the next in the supply chain and eventually the final consumer.

The services sector was hit hard by the pandemic and might be increasing prices as a way to makeup for the heavy losses during the pandemic.

At the same time, as Japan is facing labor shortages, service sector companies are increasing prices as a way to pay for increased wages to stay competitive with other sectors in Japan. 

Consumer spending or private consumption might take some time to see any real sustained changes as the mindsets of Japanese consumers have been conditioned to be weary about spending and for the most part, Japanese consumers are not big spenders like US consumers.

If for example, not all Japanese workers get wage increases and only the large company workers get wage increases that is still a large part of the Japanese economic workforce without any wage increases.

For example, it is estimated that 70 or the Japanese workforce doesn't work for the large name-brand  companies but small and midsize companies. If the small and midsize companies don't increase wages near what big companies pay then there is going to be a real miss-match in the Japanese economy related to Japanese consumers.

There are positives and negatives to the work hour schedule in Japan. Some women might want to work more hours while some might like the 20-29 hour schedule.

But yes, as far as taxes and insurance goes it might be a negatives for some or many.

Perhaps the entire wage, tax, and insurance system needs to be adjusted to better fit the working women who want to work more hours as needed these days with a husband and wife both working or needing to work.

Perhaps its time to adjust the system to the 2020's where more women want and need to work. The idea of stay at home mothers, even in Japan, is an outdated, as families, both husband and wife need to work to make ends meet. 

Even today, as the birth rate falls in Japan and more women and men decide to not marry and to just work and move up the ladder in their career, the system needs to change to allow career working the same advantages then men have.

Have a nice day and be safe!