Workers in Japan haven’t received a pay increase in 30 years. Companies are being pushed to make payments.

About 30 years ago, Hideya Tokiyoshi began his profession as an English instructor in Tokyo.

His pay has essentially been the same ever since. The teacher started writing books three years ago after giving up on the idea of getting paid more.

“I consider myself fortunate because book writing and sales provide a second source of income. Without that, I would have continued to receive the same salary, Tokiyoshi, now 54, told CNN. “For that reason, I managed to survive.”

Tokiyoshi is a member of a generation of Japanese professionals that have experienced very little advancement in their careers. The world’s third largest economy is currently compelled to address the main issue of declining living standards while firms are under enormous political pressure to increase prices as a result of years of deflation.

Fumio Kishida, the prime minister of Japan, is pleading with companies to assist employees in keeping up with rising living expenses. He urged businesses to raise salaries at a rate above inflation last month, and some have already complied.

Inflation is now a serious problem in Japan, just like it is in other parts of the world. Core consumer prices increased 4% from January to December of last year. While relatively modest by American or European standards, that is a 41-year high for Japan, where people are more accustomed to seeing costs decline.



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According to Stefan Angrick, a senior economist at Moody’s Analytics based in Tokyo, “real earnings are dropping fairly rapidly as a result [of inflation] in a country where you haven’t seen nominal wage increase over 30 years.”

When inflation is factored in, last month’s earnings decline in Japan was the largest in over a decade.

a persistent issue
According to data from the Organization for Economic Co-operation and Development, the average annual salary in Japan in 2021 was $39,711, up from $37,866 in 1991. (OECD).

In comparison to other Group of Seven economies, such France and Germany, during the same period, workers received a salary raise of less than 5%.

The sluggish earnings have a number of causes, according to experts. For starters, Japan has long struggled with the exact reverse of what it is dealing with right now: low pricing. Due to a strong yen that drove down the price of imports and the implosion of a domestic asset bubble, deflation began in the mid-1990s.

Consumer price inflation has essentially been unchanged for the past 20 years, according to Müge Adalet McGowan, senior economist for the OECD’s Japan bureau.

On December 23, 2022, a consumer enters a store in Tokyo. Core consumer prices in Japan climbed 4% in that month, reaching a 41-year high.
On December 23, 2022, a consumer enters a store in Tokyo. Core consumer prices in Japan climbed 4% in that month, reaching a 41-year high.
Photographs by Richard A. Brooks/AFP/Getty
Prior to today, she continued, customers would not have felt the need to demand higher wages or accept a financial damage.

However, Shintaro Yamaguchi, an economics professor at the University of Tokyo, warned that when inflation increases, people will start complaining “strongly” about the absence of hikes.

An evolving labor market
According to experts, Japan’s salaries have suffered as a result of the country’s low productivity rate.

According to Yamaguchi, the country’s output, which is determined by how much labor contributes to a nation’s GDP per hour, is lower than the average for the OECD. This is “probably the primary explanation” for flat wages.

According to McGowan, pay increase and productivity growth typically go hand in hand. “Firms do better when there is productivity increase, and [when] they perform better, they can provide higher pay.”

On Friday, December 9, 2022, pedestrians stroll down a street in Tokyo, Japan’s Omotesando district.
This massive economy wants to give its employees salary raises that will cause inflation.
She claimed that Japan’s aging population was also a problem because older workers often have lower productivity and pay. The way that individuals work is also evolving.

According to McGowan, the percentage of part-time or variable-hour employees in Japan’s entire labor force increased from about 20% in 1990 to close to 40% in 2021.

Because they earn less, she continued, “Of course the average earnings likewise stay low as the share of these non-regular workers has increased.

In November, pedestrians crossed a roadway in Tokyo’s Ginza district. More people are working part-time, changing the makeup of Japan’s workforce.
In November, pedestrians crossed a roadway in Tokyo’s Ginza district. More people are working part-time, changing the makeup of Japan’s workforce.
Images by Yuichi Yamazaki/AFP/Getty
Career-long employment
Economists claim that Japan’s distinctive work culture is a factor in the country’s stagnant wages.

According to Angrick, many people work in the old “lifetime employment” system, where employers go to great measures to keep employees on the payroll forever.

In order to have the resources to safeguard their workers in difficult times, they are consequently frequently quite cautious about raising wages in prosperous times.

They do not want to fire employees. Therefore, they require that safety net so that they can continue to employ people in the event of a crisis, he said.

On Wednesday, June 24, 2020, pedestrians cross a street in Tokyo’s Ginza shopping area.
The Japanese culture of having a job for life has endured war, earthquakes, and now a pandemic.
According to McGowan, its seniority-based pay system reduces incentives for individuals to change occupations, which in other countries generally helps push up wages. Instead, workers are paid based on their rank and length of service rather than performance.

The tenacious emphasis on compensation by seniority, according to renowned Japan strategist and investor Jesper Koll, is “the largest problem in Japan’s labor market,” he previously told CNN. “Much more job switching and career ascent would occur if true merit-based pay were implemented.”

pressure on companies
Last month, Kishida issued an economic warning, stating that if wage growth continued to lag behind price increases, Japan ran the risk of entering stagflation. The phrase describes a time when there was high inflation and slow economic progress.

An important objective of Kishida’s administration was already to increase wages by at least 3% annually. The prime minister now intends to go a step further and establish a more organized system.

When pressed for more information, a government official told CNN that the new “inclusive economic measures” will provide salary assistance while also increasing productivity.

According to a spokesman from the Ministry of Health, Labor, and Welfare, authorities intend to release rules for businesses by June.

A teacher in Japan named Hideya Tokiyoshi told CNN that during the past 30 years, his pay has hardly increased at all.
A teacher in Japan named Hideya Tokiyoshi told CNN that during the past 30 years, his pay has hardly increased at all.
Courtesy Tokiyoshi Hideya
The largest labor union in the nation, the Japanese Trade Union Confederation, or Rengo, is currently asking for 5% wage hikes in negotiations with various company management this year. This month marks the start of the yearly discussions.

According to a statement released by Rengo, the company is pushing for the change because workers are receiving “poor salaries on a worldwide scale” and require assistance with growing prices.

On October 17, 2021, the UNIQLO trademark can be displayed in Chuo Ward, Tokyo’s Ginza neighborhood. Japanese casual wear designer, manufacturer, and retailer UNIQLO CO., LTD. Fast Retailing Co., Ltd.’s fully owned subsidiary owns the business. (AP Images) The Yomiuri Shimbun
As inflation bites, Uniqlo’s owner is increasing staff pay in Japan by up to 40%.
Some businesses have already taken action. The firm that owns Uniqlo and Theory, Fast Retailing (FRCOF), revealed last month that it will raise wages in Japan by much to 40%, conceding that pay in the nation has “remain[ed] low” in previous years.

The company sought to match “with worldwide norms, to be able to boost our competitiveness,” a Fast Retailing spokeswoman told CNN, even though inflation was a consideration.

A Reuters poll conducted last month revealed that more than half of the major companies in the nation intend to increase wages this year.

One of them might be Suntory, one of the largest beverage manufacturers in Japan.

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