Japan’s Spring Pay Negotiations: Spotlight on Small Firms in Wage Hike Endeavors

 

Wage negotiations in spring are being closely watched in Japan as the country works to balance wage growth and inflation. Last year saw significant wage increases during these talks, reaching a 30-year high as companies boosted pay to keep up with rising prices. On average, affiliated unions saw a 3.58% pay bump, led by large firms.

This year, particular attention is on smaller companies, which employ around 70% of Japanese workers, to see if they can match last year’s wage hikes. Economist Tatsuhiko Nakanobu expects these firms will face pressure to raise pay in line with larger employers that set market trends. Despite challenges like cost increases, smaller firms are likely trying to allocate funds for wage boosts due to influence from industry leaders offering substantial raises.

However, polls show uncertainty, with 34.6% of small and medium firms not planning increases while 27.3% are as the rest remain undecided. Some see wage hikes as attracting talent amid labor shortages.

To assist struggling sectors, Prime Minister Fumio Kishida’s government is launching an inter-ministry team to help incorporate higher costs into prices. The goal is continuing wage growth while steering Japan away from deflation through a balanced economy. The outcome of spring negotiations will determine if this vision can be realized.