Inflation, labour crunch prodding Japan's smaller firms to raise pay

May 01, 2023 | News On Japan

May 01, 2023 (CNA) - Rising inflation and an intensifying labour crunch are prodding smaller local Japanese firms to follow their big counterparts in raising pay, a move that can generate broader wage hikes and encourage the central bank to phase out its massive stimulus.

Wages have barely risen in Japan since the asset bubble burst in the 1990s but have crept up recently, as companies face pressure to compensate employees for the rising cost of living.

Importantly, smaller firms are also starting to raise pay even as many of them face a margin crunch. A durable rise in wages is an important consideration for policymakers who seek to foster sustainable demand-driven inflation in the world's third-largest economy before starting to unwind monetary stimulus.

Big firms offered pay hikes of 3.8 per cent this year in annual wage talks with unions that ended in March, the largest increase in three decades. Attention has now shifted to whether small firms, which employ seven out of 10 workers in Japan, would follow suit.

Bank of Japan (BOJ) officials have said the outcome of small firms' wage talks, which will get into full swing towards June, will be key to whether Japan will see durable pay hikes to enable it to phase out its massive monetary stimulus. ...continue reading

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