Japan tries to avoid stagflation by raising wages
2023.01.05 07:00
Japan tries to avoid stagflation by raising wages
Budrigannews.com – Fumio Kishida, the prime minister of Japan, issued a call on Thursday for business leaders to accelerate wage increases, citing the possibility of stagflation if wage increases lag price increases.
Kishida addressed a New Year’s gathering of three major business lobbies, stating, “There are alarm bells warning that stagflation emerges if wage growth lags behind price hikes.”
Stagflation is when there is both low economic growth and high inflation, which reduces the purchasing power of households.
“Wage growth is the core of a virtuous economic cycle. The government will support my call for pay raises that are higher than inflation, “Kishida stated.
He said that in June, guidelines would be made to make the labor market more flexible. This would make it more appealing to workers who are used to having jobs for the rest of their lives to switch jobs and move into high-growth industries.
In the next five years, the government will spend 1 trillion yen (7.5 billion dollars) on retraining workers and encouraging businesses to make pay scales more flexible.
Calls for wage increases were quickly responded to by some Japanese businesses and business lobbyists.
According to Masakazu Tokura, the head of Japan’s largest business lobby, Keidanren, the corporate sector is responsible for achieving wage increases centered on a base salary that does not lag inflation.
Lawson’s president, Sadanobu Takemasu, stated at the same gathering that his company would aim for a 3% increase as a baseline for wage increases.
However, in order to easily adjust personnel costs in either good or bad times, Japanese companies typically prefer one-time bonus payments rather than increases in fixed base pay for rewarding performance.
At the labor and management talks this year, the Japanese Trade Union Confederation, or Rengo, wants 5% wage increases. Given that annual wage increases have averaged around 2% in recent years, analysts believe that to be a lofty goal.
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