Japan’s workers got a little relief last month. After nearly two years of falling wages, the regular salaries of the country’s employees finally stopped dropping in February. To be sure, the increase was barely perceptible: Pay excluding bonuses and overtime rose 0.1 percent last month—the first time wages were in the black in 22 months—the labor ministry announced today. The news wasn’t all good: Even as wages stopped falling, overall pay declined 0.2 percent. That’s the first drop in three months for overall pay.
Still, the news about wages will come as a relief to Japanese Prime Minister Shinzo Abe. Abe has been using his bully pulpit, trying to convince Japanese companies to give their employees a raise. Rising wages are a key part of his strategy to end Japan’s long economic funk. Over the past decade and a half, with Japan struggling to escape a long period of deflation, average wages in the country dropped 15 percent.
The good news is that deflation seems to be a thing of the past. With the yen much weaker than when he took office in late 2012, inflation is returning to Japan. Consumer prices, excluding food, jumped 1.3 percent in January. So workers need higher regular wages in order to feel comfortable spending. That’s especially true now, with a big tax increase about to come into effect: The sales tax goes up to 8 percent in April from its current 5 percent. That will likely stunt growth in the coming months, so any bit of help for Japanese consumers to withstand the higher tax, the better for Abenomics.
Still, Abe isn’t about to declare victory in his campaign to persuade Japanese companies to increase wages. While some companies have been willing to offer workers more money via one-off bonuses, they’re wary about committing to fixed salary increases in a country whose population is shrinking and growth prospects are iffy.
Consider the news today from Toyota (TM), the country’s largest automaker. Thanks largely to the weaker yen, Toyota expects profit in the fiscal year ending this month to hit a record ¥1.9 trillion ($18.7 billion). The union representing 50,000 Toyota workers has asked for an average net increase of ¥4,000 a month, plus bonuses of 6.8 months’ worth of salaries. The talks between labor and management aren’t going well, the head of the union said today. “We have had two rounds of negotiations so far, but there remains a big gap between us,” Mitsuyuki Tsuruoka, head of the Toyota Motor Workers’ Union, said today.
Companies that hold back might help their own prospects while hurting the chances of Abe’s economic program. “Sluggish wage growth in Japan remains a major stumbling block to higher inflation and the overall success of Abenomics,” Marcel Thieliant, an economist at Capital Economics in Singapore, wrote in a research report.