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Wages finally rising in Japan

TOKYO: Wages are rising in Japan more than they have in decades, at least for some workers. But so are prices, leaving many people feeling they must scrimp more than ever.

In May, the consumer price index was up 3.2 percent from a year earlier, well above the central bank’s target of about 2 percent. That’s great news for policymakers trying to get the world’s third largest economy out of the doldrums by keeping credit super cheap to spur demand and push prices higher.

But a government survey of companies with five or more employees found real wages, taking into account higher prices, fell 3 percent from a year earlier in April, marking the 13th straight month of declines.

People cross a street in Tokyo on June 5, 2023. Wages are rising in Japan more than they have in decades. AP PHOTO

Although all the major companies have raised wages this year, with large labor union members landing a 4 percent hike, the highest in 30 years, a quarter of small and medium-size businesses gave no pay raises, according to the think tank Tokyo Shoko Research.

“My wages haven’t gone up at all,” said Kyoko Sano, a salesclerk at a Tokyo department store.

Sano feels a bit of a jolt when a cashier rings up her purchases and angst when she checks out prices of her favorite cookies, potato chips, rice crackers and drinks. Prices have all jumped, and the usual discount offerings have disappeared. Her electricity bill keeps climbing.

“There’s no point in buying things like body lotion in advance before their prices rise. Pretty soon you run out, and you end up having to go buy them, anyway. There’s an expiration date on cosmetics,” she sighed.

Japanese workers make less across the board than their counterparts in the US and Europe. A graph comparing wages for the last several years shows the line for Japan going straight across from left to right. In other nations, including the US, they climb gradually higher.

Average pay in Japan is about three-fourths of the OECD average of about $51,000. Hourly rates for workers in many Tokyo service jobs average about 1,300 yen ($9.30) an hour, up from the previous 1,000 yen ($7.10) an hour. They’re lower in most of the country.

In theory, a vibrant economy is supposed to lead to higher prices and wages. But purchasing power has to keep up to sustain consumer demand. It’s unclear that today’s inflationary pressures, set off by the rising costs for oil and other commodities, will spur the sort of positive growth cycle Japan has been trying to achieve for years.

So far, the Bank of Japan has remained cautious, keeping the key interest rate that helps determine rates on mortgages and car loans at minus 0.1 percent, where it’s stayed for the past decade.

Wages have languished since Japan’s financial bubble burst in the 1990s, and the economy has stagnated. Employers held back on wage increases and risky investments but largely avoided mass layoffs, notes Hideo Hayakawa, a senior fellow at The Tokyo Foundation for Policy Research, an independent think tank.

The rigid structure of Japanese workplaces also tends to crimp efficiency and productivity, a factor driving improved incomes and profits, he said.

“The economy is gradually starting to move, but we don’t know yet if things will work out so wage increases can continue into next year,” Hayakawa said.

Some companies have started to raise wages, but the hefty raise new hires of Fast Retailing, which operates the Uniqlo clothing chain, got this year is relatively rare. In raising monthly pay to 300,000 yen ($2,100) a month from 255,000 yen ($1,800), the company said it hopes to retain talented workers and narrow wage gaps with employees in the US and Europe.

“We believe we must transform into a highly productive company that can compete and win on a global stage,” says Peichi Tung, global corporate communications manager at Fast Retailing.

Prime Minister Fumio Kishida wants the minimum wage to rise to 1,000 yen ($7.10) this year, up from 961 yen ($6.80), a key part of his “new capitalism” program. He also advocates giving tax breaks to companies that raise wages.

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