Reuters: Labor shortages have led to the highest wage increase in Japan in 34 years this year
Reuters, July 3 report, the Japanese trade union organization Rengo announced on Thursday that the average wage increase agreed by Japanese companies this year reached 5.25%, the largest increase in 34 years, and achieved a strong growth for the third consecutive year, mainly due to companies facing severe labor shortages and seeking to protect employees from inflation. The increases in the previous two years were 5.10% and 3.58%, respectively. The Japan Business Federation (Keidanren) also stated on the same day that the average summer bonus of large companies increased by 4.37%, reaching a record high of 990,848 yen (about 6,889 US dollars). A government official with anonymity said, "There is a consensus in the business community that the wage increase must exceed inflation, which has become the new normal." The current core inflation rate (excluding fresh food) is about 3.7%. Experts point out that sustained wage increases are crucial for maintaining a consumption-driven recovery and is a prerequisite for the Bank of Japan (BOJ) to resume interest rate hikes. Junosuke Sakai, chief economist at Mitsubishi UFJ Research and Consulting Company, expects wage growth of 4.7% next year and believes the BOJ may raise interest rates at the beginning of next year. Tetsu Ozawa, chief economist at Daiwa Securities, also expects an increase of 4.5%-4.9% next year, but pointed out that due to the potential high tariffs from the United States, the non-manufacturing sector needs to take over the manufacturing sector as the main force behind wage increases. The United States plans to impose tariffs of up to 30% or 35% on Japanese imports, adding uncertainty to the outlook.
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