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TMCNet:  Wage UPDATE2

[March 12, 2014]

Wage UPDATE2

(Japan Economic Newswire Via Acquire Media NewsEdge) TOKYO, March 12 -- (Kyodo) _ (EDS: ADDING INFO, COMMENTS) Many major Japanese companies notified their labor unions Wednesday they have decided to raise pay scales to conclude this year's spring wage negotiations, responding to strong calls from the government of Prime Minister Shinzo Abe for such action to help end long-standing deflation.


Toyota Motor Corp., which has a huge influence over other companies, will raise its average monthly pay scale by 2,700 yen and Honda Motor Co. by 2,200 yen. Likewise, six major electronics firms including Hitachi Ltd. and Panasonic Corp. have decided to raise their wage scales by 2,000 yen per month, the highest hike on record.

Although the management of many of those companies failed to fully meet labor unions' demands, the respective hike in pay scales will take place for the first time in six years, reflecting significant improvement in their business performances partly stemming from the yen's weakness that benefits exporters.

Some of them have decided to fully accept labor unions' demand over annual bonuses, while Nissan Motor Co. will also raise the monthly pay scale by 3,500 yen to fully satisfy the demand.

The moves are thanks to the government's rare and strong calls on companies to hike wages. Labor unions have seen some success during negotiations in this year's "shunto" spring labor offensive, with many of them winning a pay-scale increase.

The focus now shifts to whether such moves will spread to medium and small-sized companies as well as nonregular workers, a development considered necessary if the domestic economy is to withstand a possible downturn in demand as a result of a consumption tax hike in April.

On top of manufacturing companies, many firms in the service industry will also raise wages, with convenience store chain operator Lawson Inc. moving to raise a pay scale for the first time in 12 years after agreeing to fully meet its labor union's demand for an average pay-scale hike of 3,000 yen per month.

Meanwhile, Suzuki Motor Corp. decided to forgo a pay scale hike due to concerns about the business environment including the uncertain outlook for emerging economies.

Struggling electronics makers Sharp Corp. and Pioneer Corp. will also skip a pay scale increase as their labor unions refrained from submitting demands, effectively withdrawing from the unified labor talks of major Japanese electronics companies.

In addition to export-oriented manufacturing firms which benefit from a weak yen, nonmanufacturers such as restaurant operators and retailers, who enjoy brisk business performance thanks to robust domestic demand, will raise pay scales, which would help mitigate the adverse impact of the consumption tax hike, said Koya Miyamae, senior economist at SMBC Nikko Securities Inc.

"The government now needs to promote a growth strategy, including a corporate tax cut as well as tax breaks to support families with children, in order to prevent a further decline in population and bolster domestic demand," Miyamae said.

At a press conference in Tokyo, labor leaders welcomed the move to hike wages, saying the unions were able to fulfill their social responsibility to a certain extent.

"We considered (the wage hikes) were a concrete step for pulling Japan out of deflation and realizing a virtuous economic cycle," said Yasunobu Aihara, president of the Confederation of Japan Automobile Workers' Unions.

Noting that an expansion of employment and improvement of wages are very important factors to realize the virtuous economic cycle, Deputy Chief Cabinet Secretary Katsunobu Kato told reporters, "We want to make effort so the wage hikes will spread to small and medium-sized companies and nonregular workers." A pay-scale hike involves uniformly lifting a company's basic wage other than a seniority-based regular wage increase. It often results in a rise in labor costs, as pension benefits are calculated based on a basic wage.

Realizing wage hikes is considered a key for success of Abe's economic policies dubbed Abenomics, which aim to bring about a "virtuous cycle" of increases in corporate earnings, wages and consumption to conquer nearly two decades of deflation.

(c) 2014 Kyodo News International, Inc.

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