Prime Minister Shinzo Abe of Japan has been putting unusually strong pressure on his country's businesses to raise workers' pay, a crucial but still missing piece of his economic growth plans.
There have been repeated public appeals and a series of arm-twisting meetings with executives and union leaders - reminiscent, some analysts say, of a bygone era when Japanese governments guided the economy with a heavy hand.
On Wednesday, Abe's aggressive intervention produced the most substantial results so far, as some of Japan's most prominent companies announced their biggest pay increases in years. They include Toyota and other giants from the carmaking industry, as well as electronics makers like Panasonic and Hitachi.
"With the usual negotiations between business and labour, executives get stuck in a deflationary mind-set," Abe said in Parliament, explaining the government's decision to become closely involved. "I am counting on this progress to continue."
Wages are vital to Abe's hopes of reinvigorating Japan's economy. Household incomes remain roughly where they were 20 years ago. A tentative rise in wages last year was wiped out by increases in inflation and taxes, leaving the average Japanese worse off, and helping to drive the country into recession.
The country is only just recovering from that unexpected downturn. Without greater increases in pay, Abe and his advisers fear that an already fraying campaign to stimulate growth, known as Abenomics, could disintegrate completely.
But some question whether the size and scope of the promised increases will be enough to create a virtuous cycle of consumer spending and economic expansion. They amount to a modest $25 to $40 a month and apply only to a privileged minority of the workforce: full-time workers at the largest corporations.
Still, both business and labour groups expressed satisfaction with the outcome, saying they hoped that the pay increases would provide the economy some much-needed momentum.
"The government, our company and the union all want to contribute to putting the economy on a positive growth cycle," Tatsuro Ueda, a managing officer at Toyota, told reporters at a news conference.
The agreements came at the climax of annual talks between companies and unions that are known here as shunto, or spring battle. The custom - part seasonal ritual, part hard-bitten negotiation - has been around since the 1950s, but governments rarely play such a hands-on role.
Abe has been so involved in this year's process that observers have labelled it "kansei shunto," or shunto orchestrated by the government. Some business leaders complain privately that the intervention infringes on their freedom and could endanger their long-term competitiveness by raising the cost of labour.
In addition to using his bully pulpit as prime minister to encourage raises, Abe has dangled the prospect of tax cuts for businesses, linking potential breaks explicitly to cooperation on pay.
"If companies raise wages solidly, and invest in facilities, the Japanese people will gladly accept more tax cuts," he told a gathering of business leaders in January.
Abe's policies are a big reason that businesses have more money than usual to distribute to employees. He took office promising to reverse a rise in the value of the yen that had squeezed profits at companies like Toyota that do much of their business overseas in foreign currencies.
The yen has duly plunged, and companies are flush with cash as a result. According to the central bank, corporate cash holdings stood at 231 trillion yen, or about $1.9 trillion, at the end of December, the most on record and a more than 4 per cent increase from a year earlier. Now, companies appear to be returning the favour by sharing some of that extra cash.
Toyota agreed to lift baseline pay for its full-time Japanese workers by 4,000 yen a month, the most in 13 years. Added to regular increases linked to seniority, the average Toyota employee's monthly pay will rise 3.2 per cent, the company said, significantly above the rate of inflation.
Other large companies announced similar increases in base monthly pay. Nissan agreed to a 5,000-yen raise. Honda is lifting base pay by 3,400 yen. A group of six prominent electronics makers, including Panasonic, Hitachi and Toshiba, announced raises of 3,000 yen.
Economists say pay at companies like Toyota has long served as a benchmark for other businesses; so more of Japan's large companies are likely to follow in the coming weeks.
Many smaller companies, which often serve the domestic market, cannot afford the same level of increases. They have little to gain from the weak currency. Instead, they are getting crimped in the current environment by the rising cost of imported raw materials.
The shunto negotiations "are basically for large manufacturers, which benefited the most from the yen depreciation," said Masamichi Adachi, an economist at JPMorgan Chase.
The overall effect, though, will move the needle.
© 2015 The New York Times News Service
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