‘Shunto’ is a nation-wide wage negotiation called every spring between companies and enterprise-based labour unions in Japan. Shunto attracted special attention this year after Japanese Prime Minister Shinzo Abe urged the top leader of the Keidanren (the association of Japan’s CEOs) to target a 3 per cent wage increase.
‘Shunto’ is a nation-wide wage negotiation called every spring between companies and enterprise-based labour unions in Japan. Shunto attracted special attention this year after Japanese Prime Minister Shinzo Abe urged the top leader of the Keidanren (the association of Japan’s CEOs) to target a 3 per cent wage increase. Companies that successfully achieve this target are granted a corporate tax reduction of 5 per cent.
Abe’s latest move is the opposite of a traditional incomes policy, where the government tries to incentivise wage restraint in order to avoid inflation.
Prime Minister Abe has been criticised domestically because average workers have not benefited from ‘Abenomics’. This disappointing result for the average worker comes despite the fact that share prices have increased to highs not seen since the bursting of the bubble in the early 1990s (mainly due to a significant monetary easing policy). The Prime Minister is therefore forcing large firms to use their accumulated corporate savings to stimulate consumption by raising the wages of their employees.
The increase in the wage costs of large firms can be partly offset by a reduction in corporate tax. But this tax incentive would likely only be applied to large firms: 70 per cent of Japanese firms, most of which are small- and medium-sized, run at a loss and do not pay any corporate tax.
The Japanese public welcomes wage increases, since they have suffered from long-run deflation. But one should ask: given tightening labour market conditions, why have Japanese wages not risen automatically? The Japanese unemployment rate declined to 2.8 per cent in 2017, but the average nominal wage (including bonus payments) increased by just 0.4 per cent and negative 0.2 per cent in real term.
