According to Nikkei, Japan's largest labor union Rengo is pushing companies to raise wages by 5% next spring.
If an agreement is reached, this will be the largest pay increase in 28 years in Japan. Rengo said that the salary increase this time needs to take into account the rapidly increasing inflation in recent months, in order to ensure the life of workers.
Japan has a tradition of negotiating an annual salary increase, with an average increase of 3 to 4%. This year, Japan is experiencing higher-than-average inflation.
Japan's Ministry of Internal Affairs and Communications (MIC) on October 21 announced that the basic consumer price index (CPI) in the country in September 2022 increased by 3% compared to the same period last year. This is the 13th consecutive month the index has increased, but it is the first time to touch the threshold of 3% since 2014.
Notably, this is the 6th consecutive month that this index is above the 2% target of the Bank of Japan (BoJ). Excluding the impact of the consumption tax hikes, this is the highest increase in core CPI (excluding fresh food price fluctuations) since 1991.
During the reporting period, CPI excluding fresh food and energy prices increased only 1.8%. This shows that fresh food and energy items are having a big impact on inflation in Japan. Specifically, the price of energy (electricity, gas and gasoline) in Japan in September increased by 16.9%, while the price of food excluding perishable goods increased by 4.6%.
Against this backdrop, the BoJ maintains that Japan's current cost-of-living inflation will not be sustainable. BoJ Governor Haruhiko Kuroda forecasts CPI will likely continue to rise through the year-end, partly due to the depreciation of the yen, but the index will stay below the BoJ's 2% target next fiscal. Therefore, the BoJ believes that loosening monetary policy is necessary to ensure successful implementation of the goal of maintaining stable inflation at 2% accompanied by wage increases.
To reduce the impact of inflation on domestic households and businesses, on September 9, the Japanese Government decided to implement a new package of measures. Accordingly, Japan will spend about 900 billion yen ($5.9 billion) to implement a program of direct subsidies of 50,000 yen per household for low-income households exempt from resident tax. The government will also extend the subsidy program for petrol importers and wholesalers to maintain stable domestic fuel prices.
Currently, the Japanese Government is developing a new economic stimulus package focusing on three areas, including: resolving the situation of escalating commodity prices and the devaluation of the yen; promote wage increases; revitalize the economy through investment and reform. The Japanese government is expected to submit this stimulus package to the National Assembly for consideration and approval during the current extraordinary session.
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