Japan's large firms to raise monthly wages at fastest pace in 17 years

[TOKYO] Japan's large firms agreed to raise monthly wages this year at the fastest pace in 17 years, a preliminary report from the country's most-powerful business lobby showed on Thursday in a positive sign for consumer spending.

Large companies that belong to the Keidanren business lobby said they will raise their workers' nominal monthly pay by 2.6 per cent this year, which would be the largest gain since 1998, the report on annual wage negotiations showed.

Rising wages are essential for Prime Minister Shinzo Abe's campaign to shift growth into a higher gear and distance the economy further from 15 years of deflation.

The Bank of Japan has also repeatedly stressed the importance of annual wage negotiations as the central bank is pursuing quantitative easing to meet a 2 per cent inflation target.

However, some economists may temper their optimism due to worries that the majority of firms, which are small and not members of the Keidanren, are more reluctant to raise pay.

Since Mr Abe came into office in late 2012, his government has been encouraging private-sector firms to raise wages to help consumers shake off their deflationary mindset.

So far, the results of the government's appeals have been disappointing, according to some economists.

Data for February showed that real wages, which are adjusted for consumer price changes, have been falling for almost two years.

Household spending is also still struggling to recover from an increase in the sales tax last year to 8 per cent from 5 per cent.

REUTERS