Profit growth at Japanese firms unlikely to translate to wage hike

Japanese Prime Minister Fumio Kishida’s hopes for higher pay to mitigate the effects of rising prices were faced with a setback since, despite recording solid profit earnings, major Japanese firms are unlikely to translate the earnings to wage hikes.

He has continuously called on major businesses to consider pay hikes for their workers, and the move is a pillar of the government’s efforts to mitigate the impact of rising commodity and food prices.

“There is just not enough momentum to enable wage increases” across the board, said Saisuke Sakai, Senior Economist at Mizuho Research & Technologies, reports Kyodo News.

This comes at a time when firms from automakers and component suppliers to energy companies reported upbeat earnings for the April-June quarter and revised upward full-year projections.

“We want to reward our employees” for the improved results, Hideki Kikuyama, Senior Managing Executive Officer of Japan Airlines, told the publication. “But we are not in a situation where we can raise basic wages immediately.”

READ: Businesses in Japan urged to pay employees more

Due to the uncertain global economic outlook and increased risk of a global recession, businesses are hesitant to raise wages. Japan’s central bank has also said that higher salaries should help spur consumer spending and eventually raise prices in a sustainable manner.