By Leika Kihara and Kantaro Komiya
TOKYO (Reuters) – Japanese Prime Minister Fumio Kishida has called on companies that have recovered from pre-pandemic gains to raise wages by 3% or more in job interviews next spring with the aim of achieving a virtuous circle of growth and wealth distribution.
Kishida said at its “new capitalism” meeting that the government would take steps to continuously raise the incomes of welfare workers such as nurseries, nurses and carers by 3%.
As the recovery in the world’s third-largest economy remains the same across sectors, Kishida vowed to help small businesses cut raw material, energy and labor costs for their customers.
Kishida has made tackling wealth inequalities and redistributing wealth a political priority by making proposals for wage increases under this strategy and helping to alleviate the pain of consumers as a result of rising oil and food costs.
“I hope that in next year’s job interviews, companies that have returned to the previous level of earnings will raise their salaries by 3% or more to launch new capitalism,” Kishida said at a roundtable. “The government will do its utmost to prepare an environment to encourage private sector wage increases.
Major Japanese companies and unions have agreed to a 2.18% wage increase in 2019, 2% in 2020 and 1.86% this year.
“I want to reverse the trend of rising wages,” Kishida added.
It was the first time in four years that the government would set a numerical target for companies on the pay rise level.
Many companies have maintained low wage growth to protect jobs and deal with the impact of the coronavirus pandemic. It was not clear if the companies would comply with the request for a voluntary salary increase, even if the proposal was made.
“Along with increasing economic uncertainty, companies will be fairly cautious about raising wages,” said Takumi Tsunoda, a senior economist at the Shinkin Central Bank Research Institute.
“It will be quite difficult to get a 3% pay rise because the economy is not recovering as strongly as the government expected.”
Former Prime Minister Shinzo Abe had little luck in raising wages, despite repeated calls from companies to pass on the huge profits from “Abenomics” recovery policies.
In last year’s wage negotiations to set wages for 2021, Japanese companies offered the lowest eight-year wage hike because the pandemic hurt companies ’profits.
Slow wage growth has been among the factors that the Bank of Japan has failed to meet its 2% inflation target, as it suppresses the purchasing power of households and encourages companies to charge more for their assets.
As part of efforts to boost the still-stagnant economy, Japan last week set a record $ 490 billion spending package in the face of a global trend to eliminate crisis-type incentive measures.
This package included funding to increase the salaries set by the government to 3% of nurses and social workers.
Fusion Media or anyone involved with Fusion Media will not be liable for any loss or damage as a result of relying on the information contained in the data, estimates, charts and buy / sell signals contained on this website. Please be fully informed about the risks and costs associated with trading in the financial markets, which is one of the most risky forms of investment possible.