Japan's wage growth gathers steam as reluctant retailers raise pay

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By Makiko Yamazaki and Kentaro Sugiyama

TOKYO (Reuters) – Japanese retailers, particularly among the tightest employers, are offering big pay rises for the second straight year, meaning squeezed profits for companies, more spending for workers and the green light for more centralization. Bank rate increase.

Japan’s labor-intensive service sector has managed to avoid large or sustained wage increases, affecting part-time, low-wage retirees and housewives.

But that began to change last year as the rapidly declining working age and rising inflation made it harder for retailers — which employ 10% of Japan’s workforce — to attract and retain workers.

Policy makers, including central bankers, have not missed the announcement of continued wage increases, indicating improvement among low-wage businesses and small producers, showing a 25-year delay in wage growth.

Referring to last week’s meeting of BOJ branch managers, Bank of Japan Governor Kazuo Ueda said at last week’s meeting of regional bank executives that “there was a lot of positive talk on the wage outlook.”

The central bank has decided on its latest cycle of interest rate hikes, including another expected at a policy meeting later this week, with higher wages supporting higher prices, a continuing “virtuous circle” for services and manufactured goods.

UA Zenson, a group representing retail, restaurant, textile and other industry unions, wants wage increases of 6% for full-time workers and 7% for part-time workers by 2025, higher than the national 5% baseline set by Rengo. The biggest association.

Talks on 2025 wage levels will be completed around March and will come into effect a few months later.

“Strong wage increases will help keep Japan’s economy on the path to growth,” said Tamon Nishio, CEO of Zenson USA.

“Many of our union members are from small and medium-sized companies and are part-time workers. We want the pace of wage increases to be spread widely to our members to bring about real wage growth and create a positive cycle for the economy.”

Economists and executives, however, point to a number of uncertainties and potential downsides, including increased costs for retailers and workers’ reluctance to pass up windfall opportunities.

“A big wage increase will increase our costs,” Takaharu Iwasaki, president of Life Corp, Japan’s largest food supermarket chain, told reporters.

But as competition to recruit and retain employees increases, we want to reward them with strong pay.

The company In terms of wage increases by 2025, it is targeted at 5% for regular workers and 6% for part-time workers, the same as last year.

Retail conglomerate Aon is also aiming to increase hourly pay for its group’s 420,000 part-time workers by 7%, at the same pace as last year.

“We want to continue to grow pay, mainly for part-time workers, like last year and the year before,” CEO Motoyuki Shikata said on a Jan. 10 earnings call.

“We’re hearing from field managers that wage increases over the past two years have helped recruit workers.”

Doubts and failures

These wage increases are beginning to make themselves felt in retailers.

In life, labor costs increased by 7.9% and net profit decreased by 3.4% in the nine months to November. Aeon slipped into a net loss in the same nine-month period, as wage increases increased its labor costs by 42.7 billion yen ($270.6 million).

In the year With Japan’s population shrinking from its peak of 86 million in 1995, retailers have had little choice. The population between 15 and 64 The population between 15 and 64 will decrease by 20%, to 62 million. In two decades to 2040. The pool of part-time female and elderly workers is also shrinking.

In addition, there are doubts that wage increases will translate into higher spending, especially if inflation outpaces wage growth. Without higher costs, it will be difficult for companies to raise prices.

“Retailers are raising wages to retain workers, but it’s questionable whether they can continue to do so after this year,” said Shinichiro Kobayashi, chief economist for research and consulting at Mitsubishi UFJ.

“Consumers have somewhat accepted price increases at retailers since the pandemic, but there are signs that they are tired of unabated price increases and are turning to discount stores for shopping,” he said.

Indeed, workers do not seem to be in a spending mood.

“Our cost-saving mentality is very strong, I don’t think a higher fee will change people’s spending that much,” said Miwako, a part-time worker at a large supermarket chain in Tokyo, who asked not to be identified. Name.

While she hopes her fees will continue to increase, she said she plans to save rather than spend any fees.

(Reporting by Makiko Yamazaki and Kentaro Sugiyama; Additional reporting by Ritsuko Shimizu; Editing by Edmund Claman)