Shinzo Abe Calls For 5th Straight Pay Hike

October 27, 2017 – Japanese Prime Minister Shinzo Abe last night called for pay hikes through negotiations between management and labor unions next spring, making such a request for the fifth straight year to inject fresh momentum into wage growth.

“I hope to see wages raised by 3 percent in next spring’s wage talks,” Abe told a government panel meeting at his office. It’s rare for the prime minister to refer to a specific number for wage increase.

Abe also said the government will take “all possible measures” such as taxation and regulatory reform to lay the groundwork for companies to spend their record profits more on wages and capital investment.

The remarks came after some private-sector members of the Council on Economic and Fiscal Policy said they view 3 percent wage growth as desirable in bracing for future inflation.

With Japan’s economy expanding for a sixth straight quarter, Abe, fresh out of a decisive win for his Liberal Democratic Party in Sunday’s election, has touted an improving labor market as one of the achievements under his “Abenomics” policy mix.

But wage growth remains tepid as companies prefer hoarding cash for the future. Companies achieved a gain of some 2 percent in salaries in annual springtime “shunto” wage negotiations this year.

Economists say more robust wage increases are critical for consumers to increase consumption, a key driver of the economy, and for the Bank of Japan to hit its elusive 2 percent inflation target.

During the panel’s first meeting since the election, private-sector members urged the government not to waver in its efforts to restore the country’s tattered finances. A primary budget surplus should be achieved “at the earliest possible time” after fiscal 2020, the members said.

Abe called the lower house election to seek support for his plan to expand financial assistance for child care and education by diverting some of the tax revenue originally intended to pay down government debt when Japan raises the consumption tax in 2019.

To cope with what he described as the “national crisis” of a declining birthrate and the aging of the population, Abe has effectively given up Japan’s goal of achieving a primary budget surplus by fiscal 2020.

“We will never drop the flag of fiscal reconstruction,” Abe told the panel meeting.

Japan’s fiscal health is the worst among developed countries, with its debt twice the size of its economy. The Abe administration has pledged to realize both economic growth and fiscal rehabilitation.

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