Prominent Japanese business association to urge companies to implement wage increases exceeding 4%

07 Nov, 2023

Prominent Japanese business association to urge companies to implement wage increases exceeding 4%

Japan's largest business lobby, Keidanren, is set to encourage major corporations to consider wage increases with greater enthusiasm and determination than the previous year, according to a draft guideline for the annual wage negotiations released on Monday. This signals the lobby's intention to advocate for pay raises exceeding 4 percent.

Although the draft guideline did not specify numerical goals for the increase, it defined 2024 as "an extremely important year to attain sustainable wage growth."

During a meeting on Monday, attended by Masakazu Tokura, head of the Japan Business Federation, Prime Minister Fumio Kishida reiterated his commitment to spearhead the government's efforts to promote wage hikes during the next year's "shunto" spring negotiations.

The average pay increase at major member firms this year reached 3.99 percent, the highest in 31 years. With Russia's conflict in Ukraine and the weakening yen driving up the cost of essential goods, momentum for wage hikes is building in Japan, where consumers have long endured deflation.

In September, Tokura expressed optimism about wage hikes exceeding 4 percent next year. Kishida is contemplating a meeting, possibly later in the month, to facilitate discussions between the government, the business community, and labor unions. During this meeting, Kishida is expected to request wage increases that match the rising prices.

Rengo, Japan's largest labor organization, stated in October that it would demand a pay raise of at least 5 percent next year, a more assertive target than the "around 5 percent" it aimed for this year.

According to the Keidanren draft guideline, pay-scale increases should be regarded as "an important option" alongside regular pay raises in times of rising prices. The responsibility for contributing to structural wage hikes lies with companies and Keidanren. The business lobby is also anticipated to call on the government and the Bank of Japan to align monetary policy to achieve an appropriate level of inflation.

The guideline further emphasizes the importance of wage hikes at small and medium-sized businesses, which employ nearly 70 percent of Japan's workforce, as a means to boost pay levels across the nation.