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Japan’s Union Group Dials Back Wage Demand in Blow to Reflation

Bloomberg, Japan, 20 Nov 2015 - Japan’s top labor-union association plans to seek base wage increases of around 2 percent for the next fiscal year, dialing back its pay ambitions after the nation entered its second recession since Prime Minister Shinzo Abe took office in 2012.


The Japanese Trade Union Confederation, known as Rengo, will temper its base wage request for next fiscal year from the increase of more than 2 percent it had sought for the current year, according to a statement released Friday. Companies ended up agreeing to a 0.69 percent raise this year, the labor group said.

Bank of Japan Governor Haruhiko Kuroda and Abe’s government have emphasized the need for higher wages to help spur a revival in Japan’s economy, which contracted in the second and third quarters, tipping the nation into its seventh recession in about 20 years. Prices won’t rise in the long term if salaries don’t increase, Kuroda said Thursday after a policy meeting at which the BOJ didn’t expand its already unprecedented stimulus program.

“Wages are rising, but it can’t be denied that the rate of increase has been somewhat slow,” Kuroda told reporters. Next year’s spring wage negotiations are “going to be very important,” he said.

Base pay for regular workers, excluding bonuses and overtime, rose by less than 1 percent in each of the first nine months of this year, according to Japan’s labor ministry. Rengo is requesting a 4 percent increase in total salary, including seniority-based pay. Last year, it requested an increase of more than 4 percent, and its 2.73 million members eventually got an average raise of 2.07 percent.

Abe has repeatedly pushed companies to put more of their profits into higher wages and capital expenditure. His economy minister, Akira Amari, told reporters this week that the best measure to support the nation’s growth would be for companies to use their cash reserves to boost pay and investment.


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