Positive wage momentum is being observed in Japan, according to a top official

TOKYO: Deputy Chief Cabinet Secretary Hideki Murai stated on Tuesday that Japan is beginning to see early indications of a positive cycle of growing wages and inflation, highlighting the administration’s focus on expanding pay rises outside of large corporations. The government of Japan is making further efforts to alter the long-standing custom of large corporations using their enormous negotiating power to coerce smaller suppliers into accepting price reductions.

 

In guidelines that were made public in November, the government mandated that executives assume greater responsibility for the processes involved in setting pricing. It also made clear for the first time that corporations could face penalties if they exert undue pressure on suppliers to lower their costs. The actions highlight the emphasis Prime Minister Fumio Kishida is placing on increasing smaller businesses’ earnings so they can raise wages, Murai told Reuters in an interview. “We’ve made clear what companies ought and ought not to do” in negotiations over prices, according to Murai, who is in charge of the government’s effort to make sure the directives are followed.

 

“It’s important to embed new business practices so that costs are appropriately passed on throughout the supply chain.” Since growing inflation raises the cost of living for households, the administration has made achieving broad-based wage increases a primary priority. Huge pay increases have been announced by a few large companies in an effort to keep top staff and compensate for growing inflation. But with growing raw material costs hurting their margins, it’s unclear if small and mid-sized businesses—which employ 70% of all workers in Japan—will follow suit.

 

 

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