Japanese PM Abe Urges Companies to Hike Wages by 3% or More

On Tuesday, Japanese Prime Minister (PM) Shinzo Abe made a plea for companies to increase wages by 3 percent or more next year.

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“We must sustain and strengthen Japan’s positive economic cycle next year to achieve our long-standing goal of beating deflation,” Abe said in a speech during a business lobby meeting.

Japan’s unemployment rate, in November, dipped to its lowest level since November 1993, official data shows. “Since the launch of the government, we have cited economic recovery as the top priority,” Chief Cabinet Secretary Yoshihide Suga disclosed at a press conference.

Statistics revealed that unemployment stood at 2.7 percent last month while the jobs-to-applicants ratio was up 0.01 percent from November – the highest level in almost 44 years.

Japan is the world’s third-largest economy and an increase of 3% or more next year would help the Bank of Japan (BOJ) to reach its elusive 2% inflation target. “I’d like to ask companies to raise wages by 3 percent or higher next spring,” Abe said, imploring firms to spend the benefits of his “Abenomics” stimulus policies.

The “Abenomics” policy involves aggressive monetary policy, flexible fiscal policy and growth strategy including structural reform.

According to the government, the larger companies have been gradually applying annual increases of more than 2%, since 2014. 

However, BOJ Governor Haruhiko Kuroda – in his address at the meeting – pointed out that many companies remained hesitant to raise wages because they had become accustomed to prioritizing job security over wage hikes during 15 years of deflation.

“With consumers remaining reluctant to accept price rises, many firms are concerned about losing customers if they raise prices,” Kuroda said. “It seems so difficult for many firms to take the first step to raise their prices, that they wait and see what other firms are doing.”

The stimulus policies have boosted corporate profits and business sentiment by pushing up stock prices and weakening the yen, but firms remain reluctant to increase wages and prices, citing an uncertain economic outlook.

"We must sustain and strengthen Japan's positive economic cycle next year to achieve our long-standing goal of beating deflation," the Japanese PM said.

The Asian nation has experienced economic growth for seven consecutive quarters, with the government expecting an additional boost from the upcoming 2020 Olympic Games.

“Japan’s economy is expected to keep expanding through the first half of next year,” Masaki Kuwahara, senior economist at Nomura Securities, said.