[Japan] Over 90 per cent of companies agree to bump base pay

New research has revealed that a record percentage of Japanese companies raised their base pay in 2024 amid inflation and a persistent labour shortage, Nikkei Asia reports.

The Nikkei survey found that around 70 per cent of the 544 respondents received union demands for higher base pay. Of them, 94.1 per cent increased base pay, compared with 87.9 per cent in 2023.

The increase averaged 13,594 yen ($86.24) a month; up 75 per cent from 2023.

A bump in base pay also boosts the bonuses and allowances calculated using a worker's basic salary. Since it is difficult for companies to reverse changes in base pay, such rises reportedly lock them in for higher long-term labour costs.

During Japan's deflationary years, companies had kept base wages largely flat, however, with inflation climbing, a higher base pay is essential for raising wages in real terms.

The average wage increase - including base pay and seniority-based rises - grew 1.61 percentage points in 2024 to 5.67 per cent among 360 companies with comparable data from 2023.

According to Nikkei, it represents the steepest increase since 1990, the tail end of Japan's asset price bubble, and the third straight year of gains.

In response to the factors that led to their decision, 68.6 per cent reportedly cited the increase in consumer prices, while 42.9 per cent cited government requests for higher wages. Labour shortages were also referenced by 42.1 per cent of respondents, up 10.8 points from 2023.

Manufacturing wages grew 6.02 per cent overall. Steelmakers - who must negotiate with unions every other year - saw the largest increase out of 26 manufacturing sub-sectors at 12.67 per cent.

Nippon Steel increased wages by 14.16 per cent, 4.7 times as much as last year in yen terms, exceeding union requests.

"Higher pay is indispensable for raising the productivity of our workers," Tadashi Imai - President and Chief Operating Officer - said. "The hike was a strategic move."

Other companies imposing significant increases included those in industries struggling with staff shortages, such as construction and food service.

Zensho Holdings - operator of restaurant chains including Sukiya and Hama Sushi - raised wages by 12.2 per cent. In 2021, the company agreed with its union to raise base pay every year until 2030. It told Nikkei that this year's hike is part of a push to "secure talented workers to drive overseas expansion."

General contractor Takenaka increased wages by 10.03 per cent; around double its 2023 rise in yen terms. The company is reportedly taking a more conservative approach to acquiring new contracts due to overtime restrictions in effect this year. It expects revenue to fall 3 per cent to 1.56 trillion yen in 2024 but has expressed the hope that higher pay will help with worker retention.

"Companies are making capital investments and forming new tie-ups to boost competitiveness," Hisashi Yamada - a business professor at Hosei University in Tokyo - told Nikkei Asia.

"They must secure talent to keep growing, so we will likely continue to see wages rise."

The survey was reportedly conducted in April in partnership with Nikkei Research. It targeted 2,248 companies, including publicly traded companies and leading privately-held businesses.

Source: Nikkei Asia

(Quotes via original reporting)

New research has revealed that a record percentage of Japanese companies raised their base pay in 2024 amid inflation and a persistent labour shortage, Nikkei Asia reports.

The Nikkei survey found that around 70 per cent of the 544 respondents received union demands for higher base pay. Of them, 94.1 per cent increased base pay, compared with 87.9 per cent in 2023.

The increase averaged 13,594 yen ($86.24) a month; up 75 per cent from 2023.

A bump in base pay also boosts the bonuses and allowances calculated using a worker's basic salary. Since it is difficult for companies to reverse changes in base pay, such rises reportedly lock them in for higher long-term labour costs.

During Japan's deflationary years, companies had kept base wages largely flat, however, with inflation climbing, a higher base pay is essential for raising wages in real terms.

The average wage increase - including base pay and seniority-based rises - grew 1.61 percentage points in 2024 to 5.67 per cent among 360 companies with comparable data from 2023.

According to Nikkei, it represents the steepest increase since 1990, the tail end of Japan's asset price bubble, and the third straight year of gains.

In response to the factors that led to their decision, 68.6 per cent reportedly cited the increase in consumer prices, while 42.9 per cent cited government requests for higher wages. Labour shortages were also referenced by 42.1 per cent of respondents, up 10.8 points from 2023.

Manufacturing wages grew 6.02 per cent overall. Steelmakers - who must negotiate with unions every other year - saw the largest increase out of 26 manufacturing sub-sectors at 12.67 per cent.

Nippon Steel increased wages by 14.16 per cent, 4.7 times as much as last year in yen terms, exceeding union requests.

"Higher pay is indispensable for raising the productivity of our workers," Tadashi Imai - President and Chief Operating Officer - said. "The hike was a strategic move."

Other companies imposing significant increases included those in industries struggling with staff shortages, such as construction and food service.

Zensho Holdings - operator of restaurant chains including Sukiya and Hama Sushi - raised wages by 12.2 per cent. In 2021, the company agreed with its union to raise base pay every year until 2030. It told Nikkei that this year's hike is part of a push to "secure talented workers to drive overseas expansion."

General contractor Takenaka increased wages by 10.03 per cent; around double its 2023 rise in yen terms. The company is reportedly taking a more conservative approach to acquiring new contracts due to overtime restrictions in effect this year. It expects revenue to fall 3 per cent to 1.56 trillion yen in 2024 but has expressed the hope that higher pay will help with worker retention.

"Companies are making capital investments and forming new tie-ups to boost competitiveness," Hisashi Yamada - a business professor at Hosei University in Tokyo - told Nikkei Asia.

"They must secure talent to keep growing, so we will likely continue to see wages rise."

The survey was reportedly conducted in April in partnership with Nikkei Research. It targeted 2,248 companies, including publicly traded companies and leading privately-held businesses.

Source: Nikkei Asia

(Quotes via original reporting)