Japanese employers offer lowest salary increase in 8 years

Companies are offering the lowest pay rises in eight years – signaling an end to former prime minister Shinzo Abe’s stimulus policies.
By: | March 19, 2021

This came about after labour negotiations on Wednesday which took into consideration the impact of the pandemic on the local economy. 

For the past seven years, major companies had offered salary increases of 2% or more during Japan’s spring wage negotiations, in line with the government’s adoption of Abenomics to jolt the economy out of two decades of deflation. Named after Shinzo Abe, Abenomics proposes wage increase, among other measures, to reflate the economy. 

In recent years, the persistent labour shortage in the country due to a rapidly ageing population was also a factor for employers to offer higher pay to attract talent. 

However, the pandemic has adversely impacted the service sector, affecting restaurants, transportation, hotels, leisure and tourism, and forcing companies to prioritise job security over annual base pay increases, analysts say. 

Japan Research Institute senior economist Hisashi Yamada said, “The momentum towards wage hikes has weakened. It has turned out uneven among industries and companies.” 

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The annual wage talks serve as an indicator of corporate strength and household purchasing power – both of which are needed to generate sustainable economic growth and achieve the central bank’s 2% inflation target. 

Many companies and labour unions have lowered or foregone base pay hikes – a key factor for determining the strength of wage gains or lack of it for full-time employees – which come on top of seniority-based pay rises, according to Reuters.