Japan govt official denies reports that PM to call for 3% wage hike next year

TOKYO: A Japanese government official has denied media reports that Prime Minister Fumio Kishida will propose that the business sector raise wages by around 3% in next year's annual wage negotiations.

The proposal was reported by Kyodo news agency and other outlets, which said Kishida would put it forward at a government panel on Friday.

But a government official involved in organising the panel denied the reports, saying Kishida would not make such a proposal. The official spoke on condition of anonymity because he was not authorised to speak publicly.

Kishida has made tackling wealth disparities and redistributing wealth a political priority. Kyodo said the wage hike proposal would be part of this strategy as well as helping to ease the pain on consumers from rising oil and food costs.

It would be the first time the government would set a numerical target for businesses on wage hike levels in four years.

Many companies have kept wage growth low to protect jobs and weather the hit from the coronavirus pandemic. It was unclear whether companies would heed a request for voluntary wage hikes, even if the proposal were made.

"With economic uncertainty heightening, companies will be quite cautious about raising wages," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

"It will be pretty tough to achieve a 3% wage hike as the economy isn't recovering as strongly as the government had expected."

Former Prime Minister Shinzo Abe had little luck boosting wages despite repeated requests for businesses to pass on huge profits they earned from his "Abenomics" stimulus policies.

In last year's wage negotiations to set salaries for 2021, Japanese firms offered the lowest wage increases in eight years as the pandemic hurt corporate profits.

Slow wage growth has been among the factors that have kept the Bank of Japan from hitting its 2% inflation target, as it saps households' purchasing power and discourages companies from charging more for their goods.

Part of efforts to prop up a still-stagnant economy, Japan unveiled last week a record $490 billion spending package, bucking a global trend towards withdrawing crisis-mode stimulus measures.

The package included funding to increase government-set wages for nurses and social care workers by 3%.