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Japan’s largest employers have agreed to raise wages by 5.28% in 2024, the highest increase in 33 years, according to the country’s main union group, bolstering expectations that the country’s central bank will soon exit a decade-long stimulus program.
The stronger-than-expected result comes as the Bank of Japan prepares to discontinue its eight-year negative interest rate policy. BOJ officials highlighted that they will determine the timing of a shift based on the outcome of this year’s annual salary negotiations.
Policymakers expect that significant salary increases will stimulate consumer spending and lead to more sustainable growth in the broader economy, which narrowly averted recession late last year.
Workers at large corporations requested yearly raises of 5.85%, exceeding the 5% level for the first time in 30 years, according to trade union group Rengo.
Related link: Top Japanese Business Lobby Wants Wage Hike Above Inflation
The union group, which represents over 7 million workers, many of whom work for huge corporations, had set its sights on more than 3% in base pay increases — a vital indicator of wage strength because wage curves serve as the foundation for bonuses, severance, and pensions.
Analysts predicted a growth of more than 4%, following last year’s 3.6% increase, which was a three-decade record.
Rengo CEO Tomoko Yoshino told a press conference that rising income inequality, inflation, and a labor shortage were among the factors behind the significant increase, adding that part-time workers will enjoy 6% pay increases this fiscal year.
Yoshino stated that the country was at a key point in its economic restoration.
The government expects pay increases to trickle down to small and medium-sized businesses, which account for 99.7% of all enterprises and over 70% of the country’s workforce, but many lack the pricing authority to pass on greater costs to their customers.
Most smaller companies’ wage negotiations are expected to be completed by the end of March, and any increases will likely be lower than those agreed upon by larger firms.
Even while Japanese corporations have raised wages, the gains have mainly failed to keep up with inflation. Real wages, adjusted for inflation, have decreased for 22 consecutive months.
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