Japan’s Abe to Make Wages His Big Priority

Prime Minister Shinzo Abe had one request when representatives of the government, labor and management met earlier this week at the Prime Minister’s Office: Raise wages in the next spring labor offensive.

Abe’s request to labor and management was prompted by his decision to postpone an additional consumption tax hike, which was originally scheduled for next October. Abe has pledged that the tax hike will take place in April 2017, but to fulfill his promise it is essential that companies boost workers’ wages to generate higher incomes for the entire nation.

As the benefits of the economic recovery have yet to reach small- and medium-sized enterprises as well as local cities and villages, it is uncertain how extensively a trend of wage increases would spread.

“I promised the people I would prepare the ground for wages to increase next spring and the following spring. I want to achieve wage rises through three-way meetings between government, labor and management,” Abe said at Wednesday’s meeting.

When announcing the delay in the consumption tax increase, Abe said there would be no further postponement, stating that the hike would take place in April 2017 without fail. It is therefore imperative that wage increases occur during this period to raise the nation’s income level.

In the spring labor offensive this year, about 90 percent of large companies increased workers’ wages, many of them raising base salaries, following an agreement reached by the government, labor and management at a meeting at the end of last year. According to a survey by the Japan Business Federation (Keidanren), increases to workers’ wages at large companies through the labor offensive were 2.28 percent, the highest in 15 years.

Abe’s strategy is that higher wages for employees will boost product sales, which will result in better corporate earnings. If company profits increase, they will be inclined to raise their workers’ salaries once again.

via Japan News

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza