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TOKYO (Reuters) – Japanese companies have agreed to an average 5.10 percent monthly wage increase this year, the largest in 33 years, the country’s largest union group Rengō said on Wednesday, concluding a business survey conducted since March.
The results of the “shunto”, which literally means spring labor offensive, are seen as key for Japan to achieve a virtuous cycle of economic recovery driven by improved household incomes and consumption that outweighs rising living costs.
Achieving positive and sustainable growth could help policymakers bring deflation to a definitive end and move the Bank of Japan closer to further interest rate hikes as part of its efforts to normalize monetary policy.
In mid-March, major companies announced a first round of wage increases accelerating to 5.28% – the largest in 33 years. Then the Bank of Japan made its historic decision to end negative interest rates and yield curve control.
With corporate pay rises a foregone conclusion, attention is now turning to whether wage increases might trickle down to smaller companies struggling to pass on costs to boost profit margins.
While part-time hourly wages are rising rapidly as Japanese companies need to attract young workers capable of dealing with a chronic labor crisis, income gaps remain wide.
As part of efforts to address the gap, Prime Minister Fumio Kishida’s administration has pledged to raise the minimum hourly wage to 1,500 yen ($9.27) from about 1,000 yen currently on average by the mid-2030s.
(1 dollar = 161.8300 yen)
