Photo/Illutration An official of the Japanese Association of Metal, Machinery and Manufacturing Workers writes results of the “shunto” wage hike negotiations of affiliated unions in Tokyo’s Minato Ward on March 15, 2023. (Jumpei Miura)

This year's "shunto" spring labor negotiations, which will strongly influence the future of Japan's economy, is coming into full swing.

It is a critical juncture to establish a pattern of modest inflation and robust wage growth that surpasses the pace of rising prices.

Both labor and management are being put to the test to ensure sufficient wage increases and to expand this trend to small and midsize enterprises.

Last year, consumer prices in Japan rose by 3.1 percent. As wage hikes failed to keep pace with inflation, real wages fell below the previous year's level for 20 consecutive months up to November last year.

Significant wage increases in this year's shunto negotiations are essential to protect the livelihoods of workers.

The Bank of Japan aims to achieve a 2 percent annual inflation rate accompanied by wage increases. Until last year, prices rose primarily due to higher overseas resources costs.

As the upward trend in resource prices slows, the economic situation now demands an assessment of whether and how a stable rise in prices led by wage increases is achievable. This year's shunto holds the key to success or failure in this endeavor.

Rengo (Japanese Trade Union Confederation) has set a goal of "wage increases exceeding the previous year’s levels."

Rengo aims for an over 3-percent “base-up,” an across-the-board increase in the basic salary of employees, regardless of their individual performance or seniority, and a higher than 5-percent overall wage growth, including “teiki shokyu,” or predetermined salary increases at regular intervals, typically given annually.

Masakazu Tokura, the chairman of Keidanren (Japan Business Federation), the nation’s most influential business lobby, also recognizes the need for bold wage hikes.

Tokura has stated that businesses should “bravely tackle” the challenge of offering wage increases outpacing last year's levels.

In its spring labor offensive guidelines, Keidanren urges its member companies to consider base-up wage hikes as a “major option.” Some large corporations have already announced wage increases in moves that reflect their strong earnings performances.

For the past quarter-century, Japan has gone through prolonged wage stagnation. In past shunto negotiations, Keidanren dismissed base-up as being out of the question.

Even after Japanese companies started reporting record profits almost annually, partly thanks to policy support, the federation of the nation’s largest employers remained reluctant to promote raises of wages.

If, in this year's shunto, employers fail to deliver a noticeable and sustained overall increase in the inflation-adjusted earnings of workers, they will be blamed for hindering a “virtuous economic cycle,” a positive feedback loop in which rising wages and prices reinforce each other, leading to sustained economic growth.

Japan's premier business organization and major companies are urged to act in line with Keidanren’s own shunto guidelines, which say maintaining and strengthening the momentum of wage increases is its “social responsibility.”

Rengo also needs to confront the fact that last year's wage increase rate did not keep up with inflation and approach this year's shunto with a sense of urgency.

The societal demand for wage increases is growing and failing to seize this opportunity could cast doubt on its competence.

Particularly crucial in this year's shunto is to extend the trend of wage increases to small and midsize firms, which combined account for 70 percent of the nation’s workforce.

For this to occur, large corporations that place orders to smaller firms must accept reasonable cost increases, including labor costs of those firms, by buying their products at higher prices.

Leaders of large corporations must be aware of their heavy responsibility in this regard and strive to ensure that workers, including those of their contractors and suppliers, will earn more in real terms so that their paychecks have increased purchasing power.

--The Asahi Shimbun, Jan. 25