Japanese Prime Minister Fumio Kishida on Tuesday called on companies to aim for wage increases that keep pace with accelerating inflation in wage negotiations next spring as he seeks both economic growth and redistribution amid the hike. the cost of living.
To pave the way for wage growth, the government will expand subsidies for small and medium-sized businesses as long as wages increase, according to a government plan.
It will also encourage larger companies to accept higher prices set by subcontractors by making public the names of those who refuse to do so repeatedly or without providing justification.
“I hope that negotiations will take place between management and the unions to bring about wage increases that can offset inflation,” Kishida said at a government panel meeting on the creation of a “new form of capitalism”.
The request has been included in a list of priority items that will go into a new economic package to be completed at the end of the month. Kishida has already instructed officials to focus on three areas: coping with inflation and the weak yen, stimulating wage growth, and achieving growth through investment and reform.
Wage growth is central to Kishida’s stated policy of promoting wealth redistribution and to the Bank of Japan, which has shown no signs of changing its ultra-low rate policy.
Japan is known for its persistently slow wage growth, low labor productivity, and low labor mobility. Russia’s war in Ukraine has greatly increased the prices of energy, raw materials and cereals, accelerating inflation. This highlighted the need for more robust wage growth amid rising cost of living.
The plan does not provide a specific numerical target, but Japan’s core consumer inflation, which excludes volatile fresh food, has accelerated to 3%. For this year’s annual negotiations between management and unions, Kishida asked major Japanese companies that had seen their earnings return to pre-pandemic levels to raise wages by 3% or more.
Eventually, Japanese companies agreed to raise an average pay by 2.07%, surpassing the 2% threshold for the first time in three years, according to data from the Japanese Trade Union Confederation, or Rengo.
The plan discussed at the meeting on Tuesday also aims to reform the country’s labor market in the medium to long term by promoting a shift from seniority-based pay, still prevalent in Japan, to one more based on duties and responsibilities.
The government aims to invest 1 trillion yen ($ 6.9 billion) over the next five years in human resource development, enabling people to learn new skills and making it easier to change jobs.
The promotion of startups in Japan is another key area for growth as Kishida wants to see the efforts of Japanese companies intensified to solve the social challenges that can lead to economic growth.
The government will target at least one startup generated in each national university to launch an initial public offering.