Toyota, Honda and Toshiba Workers To Get Pay Rise
In most countries the awarding of a pay rise is not big news unless it has come after a period of industrial unrest. In Japan, though, this is big news where workers at some of the biggest companies in the world have just negotiated their first pay rise in six years and the biggest for more than 21 years in a step that is seen crucial for the success of the Japanese government’s “Abenomics” stimulus programme.
Profits for the big Japanese car manufacturers have seen a big boost over the past 12 months as the artificially weakened Yen has lifted returns by pushing up income from cars sold overseas. The repatriation of profits during this period has swollen the automakers’ bank accounts and the government had been urging the industry to boost wages in what is seen as a reciprocal move during the “Shunto” or “spring offense” as it translates into English (see Japanese Autoworkers Want a Slice of the Abenomics Pie).
It is thought that more than 50,000 workers at Toyota alone will see their monthly salaries rise by about USD26 per month, which may not seem like a lot of money but traditionally Japanese companies have operated a bonus system that accounts for between 20% to 30% of annual income; this year, workers at Toyota will receive a share of the profits in bonus form, which amounts to an additional JPY2.4 million in annual bonus, an amount that is equivalent to about seven months’ salary for the average worker.
It is not all good news for the autoworkers of Japan though. Workers may still struggle to offset the planned sales tax increase that is set for implementation next month and the pay rises are only for those in the big blue chip companies. Much of Japan’s workforce are employed by smaller companies that have not benefited from the abenomics initiative yet.
The Bank of Japan and the government there have been purchasing assets on a massive spending spree in an attempt to drag the world’s third largest economy out of the fifteen-year deflationary cycle that it has been in ever since the property bubble burst, but a durable recovery would need to see a cycle of rising profits, wages and prices.
The Japanese government lead by Shinzo Abe has been publicly pressuring companies to do their part and raise wages. Economy Minister, Akira Amari, appeared to threaten government action against firms that don’t comply.
“Companies that don’t make any response, despite having higher profits, despite the government front-loading corporate tax cuts and transferring capital to them, are being uncooperative in contributing to a positive economic cycle,” Amari said on Tuesday. “The Ministry of Economy, Trade and Industry will take some kind of response.”
For major firms, generally, total increases are likely to be about 3%, analysts say, just enough to cover the sales tax increase that takes effect next month, but not enough to offset the mild inflation that the Bank of Japan is trying to achieve.