Lackluster pay hikes in Japan’s annual wage talks

Major Japanese firms are shying away from offering base pay increases, as it turned out in the country’s annual wage talks held on Wednesday. Automakers, which are often considered benchmark-setters in wage discussions, either did not increase base pay or offered only a token raise: for example, Nissan Motor reportedly declined to match the amount requested by its labor union. The steel industry also did not increase base pay, while some electronics companies, citing business difficulties caused by the Covid-19 outbreak, offered only small increases or suspended wage negotiations altogether.

This is a major comedown from the 2.43 percent average increase that Japanese companies offered their employees last year, and much of it may be attributed to the outbreak affecting supply chains. The auto and electronics industries, for example, rely heavily on parts manufactured in China, but now that those OEM suppliers have suspended or cut back operations, the end product manufacturers are caught without the materials they need, and as their own ability to operate is reduced, that in turn affects their other suppliers.

At the same time, local industry associations have been putting pressure on various wage practices, including that of uniform increases. Japanese labor unions traditionally come together to demand industry-wide wage increases each year, regardless of individual business performance, and in January, the largest business lobby, Keidanren (the Japan Business Federation) called for a review of the practice, saying that a uniform increase is unrealistic when business conditions and profitability vary so widely across any given industry. However, the country’s largest labor organization, Rengo (the Japanese Trade Union Confederation) opposed the call, responding that a uniform increase was needed to benefit employees at SMEs and irregular workers.

With the outbreak forcing many businesses’ hands, however, labor organizations may be forced to accept the argument against uniform increases. During the wage talks, for example, the Japanese Electrical, Electronic, and Information Union already broke tradition and accepted different responses from companies in the industry.