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Japan Auto Industry Faces More Labor Unions Seeking Higher Wages

Mazda Employee
An employee works on parts as he assembles a Mazda Motor Corp. Atenza sedan (Mazda 6) on the production line at the company's plant in Hofu, Yamaguchi Prefecture Japan’s auto manufacturing and auto-related industries employ 5.48 million people, about 8.8 percent of the nation’s total working population, according to Japan Automobile Manufacturers Association. Photographer: Kiyoshi Ota/Bloomberg

Most Japanese auto-related companies are facing union demands for higher pay as a weaker yen boosts profits at manufacturers led by Toyota Motor Corp.

More than 900 auto-industry unions have requested or are expected to ask for increases in base salaries, the most since 2008, according to Tamayo Tomita, a Japan Confederation of Automobile Workers’ Unions official. The average salary increase sought is about 1.3 percent, or 3,087 yen ($30) a month, while the average bonus request is 4.73 months’ worth of salary, according to a statement from the confederation yesterday.

Toyota, Japan’s largest manufacturer and employer and No. 1 parts supplier Denso Corp. are among companies forecasting record profit for the year ending March 31, after Prime Minister Shinzo Abe’s program of monetary easing and stimulus spending weakened the yen, boosting the value of overseas earnings. The current talks between unions and management are known as “shunto,” or the spring wage offensive.

“No matter what the businesses auto-related companies are in, no matter what the scales are, about 90 percent of the unions are asking for a raise in base wages,” Hidenari Hori, assistant general secretary at the confederation of labor unions, said yesterday in Tokyo.

Racing Inflation

Abe has urged companies to raise wages faster than gains in the cost of living to help sustain an economic recovery.

Toyota’s labor union, representing more than 50,000 workers, is negotiating for a net 4,000 yen average increase in monthly wages and annual bonuses valued at 6.8 months’ salary, or about 2.44 million yen. The requests for both base wage and bonuses are highest among all Japanese automakers’ unions.

The requests are “surprisingly high” and a 1 yen increase in salary costs the carmaker more than 2 yen, Toyota Senior Managing Officer Naoki Miyazaki said Feb. 19. That’s because higher base pay raises the company’s costs for benefits including insurance, he said.

Companies including carmakers are scheduled to announce their final 2014 wage plans this month.

Abe’s economic program, known as Abenomics, spurred a 51 percent advance in the Topix index of shares last year, and an 18 percent plunge in the yen versus the dollar.

Inflation Faster

The wage increases in Japan will probably fail to keep pace with inflation, highlighting risks that the nation’s recovery will stall, surveys of economists show. Base wages fell in December for a 19th straight month, the labor ministry said Feb. 5.

Labor cash earnings, the benchmark for wages, will increase 0.6 percent in the year starting April 1, according to the median forecast in a poll of 16 economists by Bloomberg. Consumer prices will climb five times faster, increasing 3 percent, as Japan raises a sales tax for the first time since 1997, a separate Bloomberg survey shows.

The prime minister has pressed companies to pass some of the windfall to workers through higher base pay, in meetings with corporate and union leaders since September.

In an interview in December, Abe said he wanted wages to rise more than prices. He said Feb. 17 it would be best if pay were to increase by 2 percent or 3 percent.

Japan’s auto manufacturing and auto-related industries employ 5.48 million people, about 8.8 percent of the nation’s total working population, according to Japan Automobile Manufacturers Association.

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