Rumors that Japanese Prime Minister Shinzo Abe’s “Abenomics” – his aggressive financial strategies for dragging Japan out of chronic deflation – is actually working just won’t go away, and that the country just increased wages for workers for the first time in two years seems to give legitimacy to Abe’s efforts. On Tuesday, Japan’s welfare ministry reported that the basic earnings of workers in the world’s third-largest economy rose by 0.1%, the first time since March 2012.
Wages in Japan have actually been on a declining trend since the late 1990s, but it seems that Japan Inc. – the firms that make up the core of Japan’s export-driven economy – have responded to Prime Minister Abe’s call for them to share their profits to the blue and white collar levels. Top Japanese manufacturers, like Toyota Motor Corp., have already agreed that they will raise wages for the first time in years. The workers’ union at Toyota has asked for an increase in monthly pay of 1.15% which translates to 4,000 yen (around US$39 dollars), while unions at Nissan Motor Co. and Honda Motor Co. have called for a base pay increase of 3,500 yen, a 0.96% increase. These automotive manufacturers are at the top of the list of those who benefited from Abe’s campaign to weaken the value of the yen, thereby boosting export-driven companies. As these manufacturers announced big profits at the end of their fiscal year, Abe has made a plea to them, asking them to share the profits to the workers.
In Abe’s strategy, increasing base pay at the level of the workers would do a lot of good for raising the buying confidence of the Japanese public – especially as a sales tax increase looms. If the Japanese public starts spending money on its own products again, then that will serve as a more durable foundation for Abe’s campaign to pull Japan’s economy out of the red. This may not be as easy as in theory, as the Japan’s gross domestic product data for the October-December period showed growth at an annual pace of just 1%, slower than what economists had been expecting. Still, the wage increase is a relatively good sign for the country.
[via Wall Street Journal]