Abe calls for wage rises to boost Japanese economy

Shinzo Abe has demanded that companies raise wages next year by at least as much in 2017, despite a fall in profits, as he tries to keep Japan’s economy on track.
In a meeting on Wednesday of the prime minister’s labour reform working group, Mr Abe told business leaders that he “expects wage rises of at least the level of this spring”, according to his office.
The prime minister’s demand signals that he still hopes to influence next year’s private sector wage negotiations as part of an effort to boost worker incomes, their consumption and thus inflation.
In a sign he may achieve this goal, Sadayuki Sakakibara, chairman of the Keidanren business group, replied: “We want to maintain the momentum of wage rises.”

Efforts to push up pay in the annual “spring offensive” negotiations between management and unions have become a big part of the prime minister’s “Abenomics” stimulus over the past three years.
In Japan’s system, a national negotiation — which Mr Abe has tried hard to influence — sets an overall goal for wage rises. Companies are free to ignore it, but large corporations in particular often try to respect the results.
Sluggish wage growth, and the resulting hit to consumption, is regarded as one of the main reasons Japan has remained mired in deflation for a generation. Mr Abe has therefore worked at persuading companies to raise pay.
In 2014 and 2015 his efforts succeeded, but this year the pace of wage hikes slowed for the first time since Mr Abe came to power, with an average rise of 2.14 per cent compared with 2.38 per cent a year earlier.
During 2015, companies were hit by a strengthening of the yen, which went from ¥120 to ¥100 against the US dollar — hitting their profits. According to the Bank of Japan’s latest Tankan survey of business sentiment, they expect current profits to fall 11.8 per cent this fiscal year.
Along with a dip back into deflation for consumer prices — dragged down by the stronger yen and the weakness of commodities such as oil — weaker profits mean Mr Abe is fighting a rearguard action to keep wages and incomes moving upwards.
The prime minister pointed out that oil prices are now above their trough early in 2016. “By next spring, I expect the rise in oil prices to be pushing up consumer prices. I’d like a debate on wage rises that considers the expected rate of inflation,” he said.
He also called on large companies to improve terms for their subcontractors. Previous attempts to push up wages have not spread beyond a small number of large corporations, one of the main reasons for their limited effect.
“To prepare an environment for wage hikes at smaller companies, I’d like you to tackle properly improvement of trading conditions for subcontractors and SMEs,” he said.
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