Top Union Leader Calls Abe's Growth Target `Pie in the Sky'

  • Rengo says government's hopes for wage gains are unrealistic
  • People `don’t know how labor negotiations actually work'

The Abe administration’s talk of expanding the economy by 20 percent is “pie in the sky,” said Japan’s top labor union leader, who also warned that policy makers have unrealistic hopes for strong pay gains.

Rikio Kozu, the president of the Japanese Trade Union Confederation, said his group had adjusted its negotiating stance because it doesn’t think that the nation has fully escaped deflation. Rengo, as the confederation is known, is seeking an increase of “about” 2 percent in monthly base wages for 2016 after falling short this year in a push for hikes of "at least" that amount.

This signals that Prime Minister Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda may not see the rising incomes they need to spur consumer spending and revitalize the economy. Kuroda has said he’ll be watching spring wage talks with “great interest” while Finance Minister Taro Aso went as far as to say unions should go for a 3 or 4 percent pay hikes.

“People can make these kind of comments because they don’t know how labor negotiations actually work,” Kozu, 59, said in an interview in Tokyo on Dec. 11. “If we could get big results by elevating our claims, we’d push them up endlessly.”

The unions under Rengo represent 6.8 million workers and based on a tally in July, 2.1 million members won base-wage gains of about 0.7 percent for 2015.

No Strikes

Kozu, who took the top union job in October after starting his career in the steel industry in 1979, has never gone on strike.

In Japan, employers and company-based unions tend to cooperate rather than fight, the legacy of a crackdown on aggressive unions during the U.S. occupation following World War II. It’s a system that worked well for Japan during the post war growth decades but it’s being questioned now as Japan struggles to revitalize the economy.

Kozu said he’s particularly mindful that seeking a high target such as 3 percent would have little chance of success with small and mid-size companies.

“If I were running the company, I’d say ‘this can’t apply to us,’ and that would be the end of it,” he said.

Abe’s Target

Abe has said he wants to expand Japan’s nominal gross domestic product by 20 percent to 600 trillion yen ($4.9 trillion) over five years.

Yoshimitsu Kobayashi, chairman of business lobby group Keizai Doyukai, has also been reported as saying the target is impossible.

Kozu said export-focused manufacturers have benefited in recent years because of the weak yen, and noted the central bank has been making a lot of effort to help the economy. Confidence in Japan’s economy among large manufacturers unexpectedly held up in the past few months, the central bank reported Monday in Tokyo. The BOJ is set to announce its policy decision on Dec. 18.

“But we strongly doubt this alone will beat deflation and create a virtuous economic cycle,” he said.

Things have yet to get to the point where the strength of the labor market and wage increases will boost consumer spending leading to higher economic growth, according to Kozu.

Rengo is concerned about a schism between workers who have stable, full-time jobs with benefits, and those who are part time and temporary workers with much less security and benefits.

“People are not going to spend money when it’s these jobs that are increasing,” he said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE