This article explains the sustainability of wage increases under the new economic and industrial policy axis, covering the challenges of the past 30 years and future prospects.
Key Points
1. Background of 30 Years of Wage Stagnation
- Long-term deflation created a culture where it was difficult to price new products and services appropriately
- Companies focused on cost-cutting including labor cost suppression domestically
- Prioritized global business expansion and overseas investments for growth and sales expansion
- Japan's wages and private capital investment remained significantly low compared to Europe and America
2. Current Wage Increase Reality
- 2024 spring labor negotiations recorded highest levels in 33 years
- Achieved wage increase rates exceeding 5% for two consecutive years
- 2025 spring negotiations also concluded at levels exceeding previous year
- Momentum for wage increases spreading among both companies and workers
3. Challenges of Price Increases and Pass-through
- Resource and raw material price increases causing prices to rise faster than wages
- The social acceptance of price increases contributes to creating a culture where "quality products command their price"
- Companies expected to pass through costs including increased labor expenses
- Changes in business practices enabling appropriate pricing
4. Key Factors for Sustainable Wage Increases
- Active investment leading to new products, services, and businesses is crucial
- Strong correlation between domestic investment growth and wage increases in major developed countries (1991-2021 data)
- Private capital investment updated to highest levels in about 30 years
- Innovation in technology and business models also necessary
5. Results of the New Economic and Industrial Policy Axis
- Since 2021, aiming for virtuous cycle of "domestic investment expansion, innovation acceleration, and national income improvement"
- Domestic investment expanding nationwide
- Published 4th interim report including sustainable growth scenarios through 2040
- "Turning point" through domestic investment and wage increases expected to lead to sustainable wage growth
The article shows the path to break free from 30 years of wage stagnation and achieve sustainable wage increases through domestic investment expansion and innovation.