CEO Morning Brief

Japan Said to See Biggest Pay Hikes in 33 Years

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Publish date: Fri, 19 Apr 2024, 09:49 AM
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TheEdge CEO Morning Brief

TOKYO (April 18): Japanese companies have agreed to raise pay by 5.20% on average this year, the biggest rise in 33 years, the country's largest union group Rengo said on Thursday, wrapping up its fourth tally of the 2024 labour talks.

The outcome of the "shunto" labour offensive is a barometer for spending and durable inflation, and a key factor the central bank gauges to decide on next steps, after its landmark decision in March to end negative rates.

"The tide of wage hikes is firmly in place," Rengo said in a statement. The raises were the biggest for the fourth round, for which it began compiling comparable data in 2013, it said.

Bank of Japan governor Kazuo Ueda has said sustained wage growth and inflation are crucial for normalising monetary policy, while Prime Minister Fumio Kishida has also expressed hopes that generous pay hikes would put a decisive end to more than two decades of deflation.

"Wage hikes are much faster than expected probably because of high import costs and government pressure on boosting pay," said Takahide Kiuchi, an executive economist at Nomura Research Institute. "If the ongoing yen weakening pushed up inflation, the Bank of Japan may bring forward the timing of its next rate hikes to the summer even though monetary policy won't target currencies."

Results of the closely watched pay talks are announced in several stages, led by blue-chip firms in March and followed by small firms concluding talks around the middle of the year.

The first round of talks produced a pay raise of 5.28%, a 33-year high, with the pace of raises inching down as more firms join the tally. The third round ended with an average 5.24% raise cumulatively.

As for small firms with employees less than 300, wage hikes have accelerated to 4.75% from 4.69% in the previous round, a trend Rengo chief Tomoko Yoshino described as "strong".

On top of automated annual salary gains, the base salary that raises corporate fixed labour costs and affects bonuses, retirement pay and pension payouts would go up by 3.57%, well above Rengo's demand for more than 3%.

A separate corporate survey by credit research firm Teikoku Databank found that 77% of the 1,050 respondents raised wages this year.

Source: TheEdge - 19 Apr 2024

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