Source: Jin10 Data
Author: Zhu Yu
As large enterprises in Japan have already begun to raise salaries, people's attention has shifted to small companies.
According to the final statistics of Japan's largest labor union, the Japanese Trade Union Confederation (Rengo), this year's annual salary negotiations ended with the highest pay raise in 33 years, confirming the wage rise trend sought by the Bank of Japan.
The Japan Business Federation announced on Wednesday the final calculation of this year's salary negotiations, showing its members achieved a 5.1% wage increase.
The results of the shunto (i.e. wage negotiations) are seen as a key to achieving Japan's economic recovery and a virtuous cycle. Achieving this positive and sustained growth pattern will help push the Bank of Japan to further raise interest rates and realize monetary policy normalization.
This result is lower than the preliminary statistics of 5.28% growth in March due to the inclusion of more negotiations, including those of small enterprises. Nevertheless, this number still represents the largest increase in 33 years. The federation has about 7 million workers, accounting for about 10% of Japan's labor force.
The Bank of Japan hopes that strong wage growth momentum will drive consumption and stable price growth. The final results of the wage negotiations further indicate that the momentum of employee wage growth in Japan is increasing. In March, a few days after the federation announced the preliminary statistical results, the Bank of Japan raised interest rates for the first time in 17 years.
The Bank of Japan will hold its next policy meeting at the end of this month. According to the latest foreign media surveys, one third of the analysts surveyed expect the Bank of Japan to raise interest rates.
The final statistics of wage negotiations highlight the difference in pay raise between small and large enterprises. In this year's negotiations, small enterprises with less than 300 employees received a wage increase of 4.45%, lower than the overall level, and the gap between the raise of small enterprises and the overall level is more significant than last year. In Japan, small enterprises employ 70% of workers.
With large Japanese companies already on board with pay raises, attention has shifted to small businesses. Foreign media reports have stated that whether small and medium-sized enterprises (SMEs) can increase wages has been a focus of the Bank of Japan and Prime Minister Fumio Kishida.
As Japanese companies need to attract young and capable workers to deal with long-term labor shortages, hourly wages for part-time workers are rapidly rising, but income gaps remain large. To bridge this gap, the Kishida government has promised to raise the minimum hourly wage from the current average of around 1000 yen to 1500 yen (US$9.27) by the mid-2030s.
It is worth noting that although the final statistics of wage negotiations are strong, it remains to be seen when wage growth will translate into actual monthly wage growth and whether the expected growth of disposable income in the context of continued inflation can restore Japan's consumer desire to spend.
Editor/Jeffy