Japan Sees Largest Salary Increase in 31 Years

The labor union in Japan has recently requested a significant salary increase, marking the largest in 31 years. This move has garnered attention as it plays a crucial role in the decision-making process of the country’s central bank to end its monetary easing policy.

Majority of Labor Unions Support Salary Increase

According to the Japan Trade Union Confederation (Rengo), out of the 3,726 affiliated unions, an overwhelming 92.6% have requested salary raises. The average wage increase demanded by these unions stands at 5.85%, which includes basic salary adjustments. This marks the highest salary increase request since 1993.

Final Negotiations to Conclude Soon

The salary increase negotiations conducted by companies will conclude on March 13, with the results expected to be announced by Rengo on March 15. Large businesses have shown readiness to implement salary raises, but the market’s concern lies in whether the upward trend will extend to small and medium-sized enterprises.

Impact on Inflation and Monetary Policy

The outcome of these negotiations holds significant importance in assessing whether Japan can initiate an inflation-wage increase cycle. Additionally, it serves as a foundation for the central bank’s decision to end its monetary easing policy.

In the 2023 wage increase negotiations, Rengo has demanded a 4.49% raise, ultimately achieving a 3.58% increase – the highest since 1993.

Positive Business Performance and Labor Shortage

The optimistic business performance in recent statistics provides a favorable backdrop for wage increase negotiations. Furthermore, the demand for salary hikes partly stems from a severe labor shortage, particularly in small and medium-sized enterprises. Currently, actual wages in Japan have not met expectations. Economists project that a 2% increase in real wages is necessary for Japan to truly overcome prolonged deflation.

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