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Analysis – Inflation, labor crunch prompt Japan's small firms to raise wages

Tetsushi Kajimoto and Kentaro Sugiyama

TOKYO (Reuters) – Rising inflation and a tightening labor force are prompting small firms in Japan’s home country to follow larger ones in higher wages, a move that could lead to Broader wage gains and encourage the central bank to gradually unwind its massive stimulus.

Wages in Japan have barely risen since the 160 asset bubble burst but have risen recently as companies face rising pay for workers cost of living pressures.

Importantly, many small firms are also starting to raise wages even as they face tighter margins. Persistent wage growth is an important consideration for policymakers seeking to foster sustainable demand-driven inflation in the world’s third-largest economy before starting to withdraw monetary stimulus.

Huixi Bosch is exactly what policymakers want to see more companies to stimulate a virtuous cycle of wages, prices and economic growth.

Theme park operator in southern Japan unveiled a plan last month to raise wages by 6% this fiscal year 2024 – a Rare preemptive wage move

“Customers have returned to pre-pandemic levels. Also, we want to give employees a sense of security in the face of rising living costs,” Yu Ito, spokesperson The office of the park operator’s president told Reuters.

“We want to maintain the positive momentum.”

Nearly 20% of Japanese SMEs Businesses (SMEs) plan to increase wages this year, with about 20% aiming for higher wages A survey by the Japan Chamber of Commerce and Industry in March showed 4% Or more. Suzette Holdings Co, a high-end confectionary manufacturer based in the western city of Ashiya, which operates more than 37 stores nationwide, is offering a bonus this year as sales return to pre-COVID levels, It is 1.3 times the average level of the previous two years.

“We want to reward employees by raising wages for as long as possible so that we can attract talent,” said company president Goki Arita.

Major companies proposed a 3.8% pay rise this year in annual wage talks with unions that ended in March, the biggest increase in 30 years. Attention has now shifted to whether the small company, which employs seven workers in Japan, will follow suit.

Bank of Japan (BOJ) officials say the outcome of small business wage talks will be fully underway in June, which will be the key to whether Japan can achieve durable wage increases that will allow it to phase out massive wage increases key. monetary stimulus.

“Many regions said wage increases were widening in many regions, even among small and medium-sized firms, due to a deepening job shortage and higher inflation,” the BOJ said in its minutes said the regional branch manager earlier last month.

Not everyone is on board

However, there is uncertainty as to whether SMEs will continue to see wage increases. The Bank of Japan’s Tankan business sentiment survey last month showed current profits at small firms fell 2.7 percent in the last fiscal year ended March, while earnings at large firms rose .5%.

Hisashi Yamada, a professor at Hosei University and an expert on labor issues, said the rise in wages may only be temporary, “so the central bank Likely to wait until next year and beyond before taking any drastic steps on policy.”

Unemployment remains at 1990 average three-year low of 2.3% , according to data from the International Monetary Fund (IMF).

Labor productivity per capita is estimated at 5 million yen ($37 ,160.20) For small and medium-sized enterprises, it is much lower than that of large companies 10 Millions of yen, government data show.

Many Japanese companies face the need to raise wages to retain workers in a rapidly aging population, although some may not be able to do so as rising raw material costs dent their profits Rate.

“Medium-to-long-term inflation expectations and the cost of transmission capacity to high-end large companies in the supply chain are important factors for small and medium-sized enterprises to raise wages,” Yamada said.

As of September last year, less than half of small firms said they were able to pass rising costs on to customers, government data showed.

Fire truck maker Nihon Kikai Kogyo in Hachioji, a city on the western outskirts of Tokyo, is among those struggling to keep lowering prices to win public tenders.

The company has been in the red for two consecutive years, seeing 11 about 160 Workers quit bonuses last year due to recession. Since then it has been unable to fill the manpower.

“Frankly, I don’t want to see wages drop again. Once it’s cut, it won’t be brought back,” said Hironobu, the company’s union representative. Yamaguchi said. “Next year we will be at a critical moment.”

($1=100.2024 Yen)



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