Shinzo Abe Awaiting Corporate Japan to Raise Wages

Prime Minister Shinzo Abe would really like Japanese companies to do something they’d rather not: give workers a raise.

Abe has in recent weeks cajoled, threatened and otherwise pressured corporate leaders to hike salaries. The lobbying effort has even extended to the golf course, where Abe is reportedly in the habit of inviting business titans for a round, and then asking them to raise wages.

The success of Abe’s economic revival plan may depend on the lobbying campaign. Last week, Abe publicly raised the issue, saying that wage hikes were needed to “spread the warm winds of economic recovery to everyone throughout the country.”

The prime minister’s plan for Japan’s economy, called Abenomics, consists of a massive bond-buying campaign, structural reforms and stimulus from the central government. The ambitious policy has helped end deflation, boost corporate earnings and send stock prices through the roof.

But the government needs businesses to do its part and pass more of their profits to workers. The idea is that workers will then increase spending, completing a so-called “virtuous cycle” that will deliver sustained economic growth.

“It will only be after the strong expansion in aggregate wages is confirmed that consumers will actually feel the economic recovery,” said Takuji Aida, an economist at Societe Generale.


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