Daily Management Review

Japan's Basic Salary Increases By The Greatest In 31 Years, Including Substantial Boosts For Part-Timers


Japan's Basic Salary Increases By The Greatest In 31 Years, Including Substantial Boosts For Part-Timers
As a result of massive pay increases granted by businesses during yearly wage talks, Japanese workers' average base pay increased by 2.5% in May, marking the highest rate of increase in 31 years. Part-time employees witnessed especially significant increases.
However, as a result of rising import costs brought on by a weaker yen and rising commodity prices, inflation-adjusted real wages decreased for a record 26 consecutive months, hindering the Bank of Japan's (BOJ) attempts to normalise monetary policy.
The central bank's ability to hike interest rates quickly will depend on wages. According to BOJ Governor Kazuo Ueda, for inflation to sustainably reach the bank's 2% objective, widespread salary rises must coincide with growing prices.
The increase in May from April to May of last year was 2.5%, faster than the revised 1.6% increase in April and the fastest since January 1993, the month that Japan's asset bubble exploded.
"The data demonstrates the growing wage momentum in Japan. Real wages are still declining, but they should begin to rise in July, according to Yoshimasa Maruyama, SMBC Nikko Securities' chief market economist.
After increasing 1.6% the previous month, nominal wages, or the average total cash earnings per worker, increased 1.9% to 297,151 yen ($1,850), representing the biggest year-over-year rise in 11 months.
However, following a revised 1.2% decrease in April, wages fell 1.4% in May when adjusted for inflation.
There were indications that wider-based salary increases are a result of Japan's worsening workforce scarcity. For the first time in 26 months, wage increases at companies with 30 or more employees exceeded inflation; nevertheless, pay increases still trailed inflation when very small companies with five or more employees were taken into account.
In May of last year, the hourly wage of part-time employees increased by 4.0% compared to a 2.7% increase for full-time employees.
One example of significant increases for part-timers is the Hotel Mercure in Sapporo, which increased part-timers' hourly wages by 15% on average this year—more than 4% more than full-timers.
"At this time of labour shortages, we need to offer high wages to attract part-time workers," said Kiyohiko Bando, manager at the hotel.
Tomomi Otake, who is currently employed part-time at the hotel, stated that the necessity to pay for her children's schooling and the appealing income lured her back into the labour after a five-year hiatus.
Thirty percent of all workers in Japan are part-time. Theirashi Yamada, a senior economist at Japan Research Institute, estimates that they and other temporary employees make around one-third of what salaried employees get on average.
"As wage hikes broaden to part-time workers, that will have a trickle-down effect on consumer spending by boosting their purchasing power," he stated.