Japan begins spring wage talks, small companies focus on Reuters

by Makiko Yamazaki

TOKYO (Reuters) – Japan’s biggest business lobby, Keidanren, and labor unions began annual labor talks on Wednesday that could lead to another year of big wage increases, although policymakers will focus mainly on how far the pace will trickle down to smaller companies.

With some big companies pledging to raise pay significantly this year, the prospect of a big wage increase will see the Bank of Japan back its case for raising interest rates later this week.

According to a poll of 35 economists conducted from December 23 to January 23, Japan’s largest companies are expected to give their workers a 4.74% wage increase this year. 8 The Japan Center for Economic Research, a private think tank.

While the estimate is lower than last year’s average of 5.33%, wages are expected to remain strong until 2022 in a country where wages have not slowed for decades, with inflation and structural labor shortages putting pressure on firms to pay workers higher.

Japanese companies They have agreed to an average wage increase of 5.1% in 2024, the biggest increase in three decades, the country’s largest union, Rengo, said.

Rengo wants a minimum wage increase of 5% by 2025, with a target of at least 6% for small firms to narrow the income gap with workers in large firms.

“We want the strong progress of the past two years to continue this year,” said Masakazu Tokura, head of Keidanren, the business lobby and Rengo, the country’s largest union.

In addition, workers in small and medium-sized companies and non-regular workers, which account for 70% and 40% of the total employment, emphasized the importance of obtaining high wages.

Japan’s smaller companies are spending more of their profits on wages than their larger counterparts and may struggle to keep up with the hike.

“Large companies will continue to lead wage growth this year, but smaller companies are struggling to pass on rising labor costs to prices and squeezing their profits,” said Satoshi Fujii at research firm Tikoku Databank.