Wage Growth Momentum Builds in Japan
Large Firms Set to Increase Wages by 5% in 2025
As Japan’s economy continues to recover, large firms are expected to increase wages by around 5% on average in 2025, mirroring last year’s growth. This development is crucial, as Prime Minister Shigeru Ishiba believes strong wage growth is essential to supporting the country’s fragile economic recovery.
Business Lobby Pledges Efforts to Boost SME Wage Growth
Takeshi Niinami, chair of Keizai Doyukai, a major business lobby, emphasized the importance of spreading wage growth momentum to smaller firms. While large firms are likely to maintain a similar pace of growth, Niinami stressed that small and mid-sized enterprises (SMEs) need to achieve wage growth exceeding last year’s levels for three consecutive years.
Record-Breaking Wage Hikes in 2024
Japanese companies agreed to an average 5.1% wage hike in 2024, the largest increase in three decades, according to Rengo, the nation’s largest union. This upward trend is expected to continue, with Rengo seeking wage hikes of at least 5% in 2025 and targeting 6% or more for smaller firms to narrow the income gap with workers at large firms.
SMEs Face Challenges in Implementing Wage Increases
A recent survey by the Japan Chamber of Commerce and Industry (JCCI), a business lobby for SMEs, revealed that 48.5% of its member firms plan to raise wages, but only about 10% plan increases of 5% or more. To address this, Ken Kobayashi, JCCI’s chair, emphasized the need to help SMEs pass on rising costs, including labor costs, to prices.
Top Executives Express Optimism
At a New Year event hosted jointly by Japan’s top three business lobbies, top company executives expressed positive outlooks for wage growth. Yoshinobu Tsutsui, chairman of Nippon Life Insurance, said his firm is planning to hike wages by 6% or more for sales employees, while Takashi Ueda, chief executive of Mitsui Fudosan, targets a wage increase of more than 5%. These sentiments suggest a growing momentum for solid wage growth in Japan.
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