Firms in Japan expected to offer largest wage increment in 26 years

Large organisations in Japan are likely to offer their biggest pay hikes in 26 years, which supports policymakers’ goal of creating sustainable wage growth and economic growth driven by the private sector.

The Japan Economic Research Centre (JERC) estimated that large organisations in Japan will raise their salaries by 2.85% on average for the new financial year starting in April. If realised, they would be the fastest pay rises since 1997 when Japan faced a period of deflation and stagnation.

A key focus of this year’s annual ‘shunto’ spring labour-management talks that conclude around mid-March is to encourage cautious organisations in Japan to accelerate wage growth. Although the inflation rate in Japan is now above the Bank of Japan’s 2% target, policymakers say that it is largely driven by commodity and energy costs and therefore cannot be sustained without accompanying wage increases.

READ: Japan commits to raising wages to achieve inflation target

In JERC’s forecast, large organisations will offer pay hikes of 2.85%, including a 1.08% rise in base salaries and a 1.78% increase in additional salary based on seniority.

The Japanese government has called on companies to offer 3% annual wage hikes, while Japan’s Trade Union Confederation, known as Rengo, has called for 5% pay increases. In last year’s wage talks, major organisations in Japan offered a pay rise of 2.2% on average, the highest increase in four years, reported The Business Times.