Japan's top union body aims for biggest pay rise in 20 years

[TOKYO] Japan's peak body for labor unions said it will seek the biggest increase in monthly wages in more than two decades as it makes inflation the key point in annual spring pay negotiations.

The Japanese Trade Union Confederation, known as Rengo, will call for a bump of more than 4 per cent in monthly pay, excluding overtime and bonuses, said the group's president, Nobuaki Koga. Over 2 per cent of this figure will be for base pay, with the remainder linked to seniority or time served at a company, according to Mr Koga.

"We know our request is ambitious, but Japanese society will be thrown into chaos unless people's incomes rise by that much," he said in an interview on Feb 20 in Tokyo. "We need to boost real wages." Salaries adjusted for inflation have dropped for 18 straight months as Prime Minister Shinzo Abe and central bank Governor Haruhiko Kuroda pump record stimulus to reflate the economy and spur price gains. After two decades of stagnation, businesses have been slow to boost pay for workers who are struggling with a sales-tax increase and the reemergence of inflation.

Some of Rengo's 6.7 million members received a boost in monthly pay of about 2.1 percent following last year's spring wage talks, after accounting for both base wages and seniority adjustments, the group estimates. That was the most since in 1999, according to Rengo.

Data from the labor ministry shows total average earnings across Japan, including bonuses and overtime, climbed 0.8 per cent in 2014. Pay adjusted for inflation fell 2.5 per cent, according to the ministry.

With profit growth in the current fiscal year through March likely to be lower than in the previous 12 months, Japanese companies have a strong incentive to rein in wage increases, according to analysts led by Yoshitaka Suda at Nomura Holdings Inc.

"Even taking into account the bullish demands from labor unions for increases in base pay, we maintain our view that although base pay increases in 2015 will be larger than in 2014, the rate of increase will not double," the Nomura analysts wrote in Feb. 19 report.

Rengo's push for base wages to rise by at least 2 per cent contrasts with the assessment of officials at the Bank of Japan that average base wage gains of 1 per cent are needed in the fiscal year starting April 1 to sustain the economy's emergence from two decades of stagnation, according to people familiar with central bank's discussions.

Governor Kuroda told reporters on Feb 18 that he expects salaries, either in base wages or bonuses, to rise amid higher company profits. He declined to specify appropriate levels for pay increases.

At a meeting of business and labor leaders Dec 16, Mr Abe said he requested that companies do their utmost to raise pay in the wage negotiations.

While businesses accustomed to deflation have been hoarding cash, more than 48 per cent of companies anticipate they will increase wages next fiscal year, according to a survey by Teikoku Databank Ltd. Labor costs may increase by 2.5 per cent on average, based on responses from 10,794 companies.

All 11 unions representing workers at Japan's auto companies will demand a 6,000 yen increase in monthly pay for next fiscal year, the Confederation of Japan Automobile Workers' Unions has said. For 63,000 union members at Toyota Motor Corp., that's equal to a raise of about 1.7 per cent in monthly base pay.

Consumer prices excluding fresh food rose 2.5 per cent in December from a year earlier.

"We are at a crossroads in terms of starting a new positive cycle now that we've exited deflation," said Rengo's Koga. "Inflation has certainly become a big factor for us."

BLOOMBERG