Japan Wage Increases Might Not Offset Higher Cost of Living

Most Japanese firms plan to raise salaries by at least the same degree as last year, but even two years of wage hikes will not be enough to compensate workers for increases in the cost of living, a Reuters poll showed.

Since taking office in late 2012, Prime Minister Shinzo Abe has heaped pressure on businesses to lift wages – seen as essential if his stimulus policies are to succeed in boosting consumer spending and dragging the world’s third-largest economy decisively out of decades of deflation and stagnant growth.

In results that come a day before Japan’s biggest firms announce wage plans following annual talks with labor unions, the Reuters Corporate Survey showed 55 percent of firms plan to lift wages by the same extent as last year. Another 14 percent say they are set to boost wages more than they did last year.

“If big companies raise wages substantially again this year, we may have no choice but to follow suit in order to secure workers regardless of our earnings,” a manager at a transportation firm wrote.

But for employees and Abenomics, the glass is set to look more empty than full, as the increases will not be enough to offset a 3 percentage point increase in the national sales tax that went into effect last April and unexpectedly tipped the economy into recession.

via Reuters

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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