Japanese Prime Minister Shinzo Abe on Tuesday urged companies to raise wages by 3 percent or more next year, keeping up pressure on firms to spend their huge cash pile on wages to broaden the benefits of his “Abenomics” stimulus policies.
“We must sustain and strengthen Japan’s positive economic cycle next year to achieve our long-standing goal of beating deflation,” Abe said in a speech at a meeting of Japan’s biggest business lobby Keidanren.
“For that, I’d like to ask companies to raise wages by 3 percent or higher next spring,” he said.
Wages at big companies have been rising slightly more than 2 percent each year since 2014, government data shows, and an increase of 3 percent or more next year would help the Bank of Japan to reach its elusive 2 percent inflation target.
BOJ Governor Haruhiko Kuroda told the same meeting that companies remain hesitant to raise wages because they had become accustomed to prioritising job security over wage hikes during 15 years of deflation.
“With consumers remaining reluctant to accept price rises, many firms are concerned about losing customers if they raise prices,” he said.
“It seems so difficult for many firms to take the first step to raise their prices, that they wait and see what other firms are doing.”
Sadayuki Sakakibara, chairman of Keidanren, made no reference to wages at his speech at the meeting, focusing instead on the need for Japan to get its fiscal house in order.
“We’d like to strongly call on the need to restore fiscal health,” as worries over the sustainability of Japan’s social welfare system could discourage consumers to spend, he said.
Abe’s stimulus policies have helped boost corporate profits and business sentiment by pushing up stock prices and weakening the yen. But firms remain reluctant to raise wages and prices, citing an uncertain economic outlook.