Japanese Prime Minister Kishida urges companies to increase wages by 3% or more Reuters

© Reuters.File picture: Japanese Prime Minister Fumio Kishida speaks at a press conference, after his ruling Liberal Democratic Party won the election held by Japan’s Kandi last month, the parliament re-elected him as Prime Minister, November 10, 2021

Author: Reika Kihara and Kentaro Komiya

TOKYO (Reuters)-Japanese Prime Minister Fumio Kishida on Friday urged companies whose earnings have returned to pre-pandemic levels to raise wages by 3% or more in labor negotiations next spring, aiming to achieve a virtuous circle of growth and wealth distribution .

Kishida said at his “New Capitalism” group meeting that the government will take measures to increase the income of welfare workers such as childcare workers, nurses, and caregivers by 3% in a row.

As the recovery of the world’s third largest economy is still uneven across sectors, Kishida vowed to help small businesses pass on raw material, energy and labor costs to customers.

Kishida has made addressing the gap between rich and poor and redistributing wealth a political priority, including proposals for raises as part of the strategy, and helping to alleviate consumers’ suffering due to rising oil and food costs.

“I expect that in next year’s labor negotiations, those companies whose profits have returned to pre-epidemic levels will raise their wages by 3% or more to initiate new capitalism,” Kishida said in a panel meeting. “The government will do its utmost to create an environment that supports salary increases in the private sector.

Major Japanese companies and labor unions have agreed to raise wages by 2.18% in 2019, 2% in 2020, and 1.86% this year.

“I want to reverse the trend of lower wages,” Kishida added.

This is the first time in four years that the government has set a numerical target for rising wages for companies.

Many companies have been maintaining low wage growth to protect jobs and withstand the blow of the coronavirus pandemic. It is not clear whether the company will listen to voluntary salary increases, even if the proposal is made.

“As economic uncertainty increases, companies will be very cautious about raising wages,” said Takumi Kakuda, a senior economist at the Shinkin Central Bank Research Institute.

“As the economic recovery is not as strong as the government expected, it will be very difficult to achieve a 3% wage increase.”

Despite repeated demands that companies pass on the huge profits from his “Abenomics” stimulus policies, former Prime Minister Shinzo Abe has had poor luck in raising wages.

In last year’s wage negotiations to set wages for 2021, Japanese companies proposed the lowest wage increase in eight years due to the pandemic hurting corporate profits.

Slow wage growth has been one of the factors that contributed to the Bank of Japan’s failure to meet its 2% inflation target because it weakened households’ purchasing power and prevented companies from charging higher fees for their products.

Japan announced a record $490 billion spending plan last week as part of its efforts to support a still stagnant economy, which runs counter to the global trend of withdrawing crisis-mode stimulus measures.

The package includes funding to raise the salary of nurses and social care workers set by the government by 3%.

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