JAPAN OFFERS LOWEST PAY RISE IN EIGHT YEARS DUE TO PANDEMIC

Japanese companies are set to offer the lowest wage increases in eight years as labor talks wrap up on Wednesday, in a sign the COVID-19 pandemic is putting an end to the benefits brought on by former premier Shinzo Abe’s stimulus policies, Tetsushi Kajimoto reported for Reuters.

Over the past seven years, major firms have offered pay rises of 2% or more in annual “shunto” spring wage negotiations, in a nod to government efforts to eradicate two decades of grinding deflation.

Abe’s policies, dubbed “Abenomics,” targeted wages among other reforms to help reflate the economy.

The country’s chronic labor shortage from a rapidly aging population also prodded companies to offer higher salaries to lure talent.

But the coronavirus pandemic has dealt a blow particularly to service-sector firms such as restaurants, transportation, hotels, leisure, and tourism, forcing them to prioritize job security over annual base pay increases, analysts say.

“Many companies are relying on government subsidies to retain jobs amid slumping profits. If the situation lasts longer, more and more firms could lay off workers,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

"In recent years unions had a clear advantage over companies as they faced a labor crunch. The pandemic has changed all that, forcing employers and labor unions to prioritize job security over pay increase.”

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