31 Jan 2014
Japan's spring wage offensive underway
FXstreet.com (Bali) - In Japan, the next phase towards ending wage deflation, known as 'the spring wage offensive', has officially started.
As Nomura reports: "Top officials of the Japan Business Federation (Keidanren) and the Japanese Trade Union Confederation (Rengo) held an open forum in late January, against the backdrop of comments by Prime Minister Abe that wage hikes form an indispensable element of Japan’s move out of deflation."
According to Nomura, there is a common recognition among employers and unions that a rise in basic salary is imperative in order to achieve long lasting inflation in the country. However, at this point, disagreements about hikes to basic pay are still evident.
Nomura notes: "Rengo is demanding the first hikes in basic pay in five years, a point also emphasized by Rengo President Nobuaki Koga. By contrast, many employers are cautious about hikes in basic pay."
Data gathered by the Institute of Labor Administration’s survey of leading union representatives at TSE-1 and TSE-2 companies show, as Nomura notes, that "employers remain cautious despite improved sentiment towards wage hikes.
The stats reflect that 66.7% of employers are in favor of wage hikes, however, only 16.1% of employers have said that they intend to hike wages, which as Nomura notes, "is admittedly 10ppt higher than in the previous survey."
Nomura continues: "This is an extremely low figure compared to the 1990s, when basic pay was consistently hiked, and indicates that employers remain cautious. It will be difficult for companies to hike basic pay substantially as, unlike one-time nonscheduled cash earnings and special cash earnings (such as bonuses), basic pay hikes push up personnel expenses in the future too."
The cautious stance among employers leads Nomura to expect basic pay to rise around 0.34%. The bank explains that employers on average are looking to raise wages by 1.96% (up 0.34ppt on last year), noting "there is an extremely close correlation between employer forecasts for wage rises and actual historical wage rises.
Nomura conclusions follow: "Adding the 0.34ppt y-y difference to projected wage increases at employers to actual wage increases in FY13 yields a 2.14% rise in wages in FY14. Assuming a 1.8% increase in scheduled cash earnings, this indicates a 0.34% rise in basic pay."
The data shown above "is much lower than the rise of over 1% sought by the unions in addition to the rise in scheduled cash earnings; that said, a 0.34% rise in basic pay would enable scheduled cash earnings, which form the largest constituent of total cash earnings at around 77%, to move out of negative territory", the bank adds.
Even if the projections by Nomura show only a small change, the bank thinks "it is a significant one, marking the first step in the move out of wage deflation."
As Nomura reports: "Top officials of the Japan Business Federation (Keidanren) and the Japanese Trade Union Confederation (Rengo) held an open forum in late January, against the backdrop of comments by Prime Minister Abe that wage hikes form an indispensable element of Japan’s move out of deflation."
According to Nomura, there is a common recognition among employers and unions that a rise in basic salary is imperative in order to achieve long lasting inflation in the country. However, at this point, disagreements about hikes to basic pay are still evident.
Nomura notes: "Rengo is demanding the first hikes in basic pay in five years, a point also emphasized by Rengo President Nobuaki Koga. By contrast, many employers are cautious about hikes in basic pay."
Data gathered by the Institute of Labor Administration’s survey of leading union representatives at TSE-1 and TSE-2 companies show, as Nomura notes, that "employers remain cautious despite improved sentiment towards wage hikes.
The stats reflect that 66.7% of employers are in favor of wage hikes, however, only 16.1% of employers have said that they intend to hike wages, which as Nomura notes, "is admittedly 10ppt higher than in the previous survey."
Nomura continues: "This is an extremely low figure compared to the 1990s, when basic pay was consistently hiked, and indicates that employers remain cautious. It will be difficult for companies to hike basic pay substantially as, unlike one-time nonscheduled cash earnings and special cash earnings (such as bonuses), basic pay hikes push up personnel expenses in the future too."
The cautious stance among employers leads Nomura to expect basic pay to rise around 0.34%. The bank explains that employers on average are looking to raise wages by 1.96% (up 0.34ppt on last year), noting "there is an extremely close correlation between employer forecasts for wage rises and actual historical wage rises.
Nomura conclusions follow: "Adding the 0.34ppt y-y difference to projected wage increases at employers to actual wage increases in FY13 yields a 2.14% rise in wages in FY14. Assuming a 1.8% increase in scheduled cash earnings, this indicates a 0.34% rise in basic pay."
The data shown above "is much lower than the rise of over 1% sought by the unions in addition to the rise in scheduled cash earnings; that said, a 0.34% rise in basic pay would enable scheduled cash earnings, which form the largest constituent of total cash earnings at around 77%, to move out of negative territory", the bank adds.
Even if the projections by Nomura show only a small change, the bank thinks "it is a significant one, marking the first step in the move out of wage deflation."