When on January 5th Japan’s Prime Minister Fumio Kishida called for business leaders to speed up the wage rise process, his voice was definitely heard. According to a Reuters monthly poll, more than half of Japanese companies are currently planning to raise wages this year.
One of the first companies responding to this call to action was the clothes giant Uniqlo, which announced the plan to raise the pay of its staff by up to 40% starting in March. This action was followed by the announcements of Canon, the camera and printer maker, and Suntory Holding, the drinks group, respectively planning to raise salaries by 3.8% and 6%. It is true, though, that at least for now the wage raise seems to remain limited to Japan’s top companies, while smaller ones, currently struggling with a spike in raw material prices and the results of almost three years of the pandemic, simply cannot afford it.
The main reason for Kishida’s call was that, if no action is taken, the continued spike in prices will lead to “stagflation“. This word, coming from the union of stagnation and inflation, would mean a big impact on households purchasing power. Kishida added that a pledge from the Government of 7.5 billion US dollars will be focused on reskilling workers for the next 5 years.
This shift in the direction raises expectations for Japan’s economic recovery. The hope is that big companies’ actions will start a virtuous cycle of rising wages, involving also medium and small companies, and leaving behind the long period of deflation and low growth that Japan is going through.