Prime Minister Shinzo Abe’s administration crafted a joint statement Tuesday with leaders of business organizations and labor unions, aiming to bolster the economy through wage growth.
At a trilateral meeting, Abe also urged large manufacturers, which have benefited from the yen’s slide, to trade with their subcontracting companies at higher prices to allow the effects of his “Abenomics” policy mix to trickle down to smaller firms and local economies.
Sadayuki Sakakibara, chairman of the Keidanren business lobby, told reporters after the meeting: “We told them we will make utmost efforts to raise wages, including bonuses and allowances.”
But it is uncertain whether other business leaders will act on Abe’s request, given that the economy shrank for a second straight quarter through September in the wake of the April 1 consumption tax hike, darkening the near-term economic outlook.
The nation’s largest labor union has decided to seek a 2 percent or greater basic pay raise in annual wage talks starting early next year, a higher goal than set for this year.
Fears, however, are growing that weak private spending following the consumption tax hike to 8 percent, as well as the yen’s depreciation which has increased import costs, have weighed on earnings, particularly at small firms, and made pay hikes a difficult option.
Amid speculation that the interest rate gap between Japan and the United States will broaden, the dollar has soared to a more than seven year high against the yen.
A falling yen usually supports exports by making Japanese products cheaper abroad and boosts the value of overseas revenues in yen terms, but it also drags down the domestic economy by pushing up import prices. Japan depends on imports for more than 90 percent of its energy needs and 60 percent of its food supply.
Last year, the government, business leaders and labor unions compiled a joint statement that prompted many companies to raise pay scales to conclude this year’s spring wage negotiations.
This year, the three shared the view that a “virtuous cycle,” where a recovery in corporate profits would lead to wage growth and consumption expansion, is necessary to defeat nearly two decades of deflation.
In the latest joint statement, the administration also called on companies to improve working conditions for nonregular employees and take measures to help empower women in society.