Japanese Companies Expected to Raise Wages by 7% Next Year... Anticipation of End to Yen Depreciation

Suntory to Raise Wages by 7% Next Year
Labor Unions Aim for 5-6% Increase
Wage Growth Expected to Surpass This Year's Rate
BOJ Expected to End Negative Interest Rate Policy

There is a forecast that major Japanese companies will significantly raise wages next year as they did this year. If such a substantial wage increase occurs as expected, it is anticipated that domestic consumption will be stimulated and a stable inflation trend will continue, leading to speculation that the Bank of Japan (BOJ) will begin to phase out its accommodative monetary policy.

Tokyo, Japan [Image source=EAP Yonhap News]

According to major foreign media on the 19th (local time), Suntory Holdings, a leading Japanese beverage company, announced plans to raise the monthly salaries of about 7,000 employees by 7% next year, following this year's increase. This measure aims to offset the impact of rising prices and secure the necessary workforce.

Takeshi Ninami, CEO of Suntory Holdings, stated, "The paradigm is shifting significantly from deflation (falling prices) to inflation," adding, "Only companies that respond quickly (through wage increases) to the rapidly changing external environment will be competitive."

Meiji Yasuda Life Insurance, an insurance company, also plans to raise the average wages of its 10,000 employees by about 7% in April next year. Big Camera, an electronics retailer, announced plans to increase the salaries of 4,600 regular employees by up to 16%.

Experts also expect Japanese companies to implement wage increases next year that surpass this year's levels. According to a survey by major foreign media, six out of ten economists forecast that the wage increase rate of major companies next year will be higher than this year. The average wage increase rate among major Japanese companies this year is 3.58%.

Labor organizations have set a wage increase target of 5-6% for next year. Rengo (Japanese Trade Union Confederation), Japan's largest labor union, aims for an increase of over 5%, while UA Zensen, Japan's largest labor union consisting of unions from 18 sectors including services, chemicals, and energy, has set a target wage increase rate of 6% for next year.

Professor Hisashi Yamada of Hosei University predicted, "With the combination of labor shortages and strong inflation, the wage increase rate next year will be the same or higher than this year."

The decision by companies to raise wages comes amid pressure from the Kishida Fumio Cabinet, which has pledged to take the lead in wage increases. Prime Minister Kishida recently took the initiative, saying, "I will persuade the business community at the forefront," after Japan's real wages declined for 18 consecutive months. He also urged cooperation from the Japan Business Federation (Keidanren), warning that "if wages do not keep pace with rising prices, the economy could return to deflation." Wage increases are a critical issue for Prime Minister Kishida, who aims to overcome the risk of declining approval ratings by restoring the livelihood economy. Wages must rise at the same pace as prices to increase household purchasing power and stimulate the domestic economy.

If wage increases lead to consumption stimulation, there is speculation that the BOJ's accommodative monetary policy will change. BOJ Governor Kazuo Ueda has stated that if a virtuous cycle is established where wages rise and prices steadily increase by 2%, the BOJ may consider ending its monetary easing policy. Since last month, he has expressed a positive outlook, noting that the possibility of realizing this virtuous cycle is increasing due to companies' proactive wage increases.

Major foreign media reported, "If a strong wage increase trend similar to this year continues next year, the BOJ will move to end its easing policy," adding, "The market expects the BOJ to abolish its negative interest rate policy around April next year, when wage increase trends become clear." In Japan, the business and labor sectors engage in spring wage negotiations, known as Chuntu, every April when the fiscal year begins.

This content was produced with the assistance of AI translation services.