TOKYO, Jan 11 (Portal) – Uniqlo’s parent company, Fast Retailing Co Ltd (9983.T), said on Wednesday it would raise wages by up to 40%, a clear sign that Japan’s wage bottom is beginning after decades could move to deflation and cost cutting.
The casualwear giant’s move is likely to sharpen focus on workers’ wages ahead of the spring’s annual labor negotiations, although the rest of Japan Inc seems unlikely to deliver increases of the same magnitude.
Prime Minister Fumio Kishida has repeatedly urged companies to raise wages, a plea that has gained urgency as prices have risen, leading to a once unthinkable rise in the cost of everything from food to fuel.
Poor pay has arguably become the biggest problem for the world’s third largest economy. In dollar terms, the median annual wage in Japan was US$39,711 in 2021, well below the OECD average of US$51,607 and is little changed since the early 1990s.
“Aside from Fast Retailing, there have been a number of companies that have increased their pay rises significantly over the past year. This is a positive factor for the Japanese economy,” said Taro Saito, executive research fellow at the NLI Research Institute.
Still, he warned that Fast Retailing was a company that had the cash to afford big raises, which was not the case for many other Japanese companies.
Fast Retailing’s move marks the first time in at least 20 years that the company, which operates more than 3,500 clothing stores worldwide, is revising compensation across its entire group, spokesman Pei Chi Tung said.
The change aims to make the company’s work style and pay more competitive globally, she said, adding that there is an “urgent need” to raise wages in Japan, where wages have remained low compared to foreign operations .
Beginning in March, new college graduates would be paid 300,000 yen ($2,300) a month, compared with 255,000 yen now, an annual increase of about 18%, the company said. New store managers will see a roughly 36% increase to 390,000 yen per month, it said.
PRICE INCREASE
The wage announcement comes a year after the company said it would increase prices on some products due to higher material and shipping costs. This year, it increased the prices of fleece goods and down jackets in its fall-winter product lines, which was seen as a kind of turning point for consumers.
Uniqlo’s ability to meet Japanese consumers’ eager demand for relatively high quality and low prices has made the company known for its “cosupa” – value for money – which makes the maker of 2,990 yen fleece jackets and 3,990 yen -Jeans with selvedge became a global retailer and founder Tadashi Yanai made Japan’s richest man.
But like other Japanese companies, it’s also grappling with a shrinking domestic labor pool.
“We believe this is likely due to inflation and Japan’s tight labor market,” said Oshadhi Kumarsasiri, an analyst at Lightstream Research, publishing on the Smartkarma platform.
“Additionally, the company’s aggressive expansion plans in markets like the US and Europe would mean that they would have to relocate some of their trained executives from Japan to those markets.”
Fast Retailing’s total labor costs in Japan would rise about 15% year-on-year, accounting for a previous increase in hourly wages for part-time workers, with the costs being offset by productivity gains, spokesman Tung said.
Meanwhile, beverage maker Suntory Holdings has announced it will increase wages by more than 6%, while Honda Motor Co Ltd (7267.T) has said it will be “aggressive” about wage increases.
The question is whether the overall increases will be enough to erase recent spikes in food and other consumer staples.
“We welcome reports from companies that have announced aggressive wage hike policies,” Hirokazu Matsuno, the government’s top spokesman, said at a news conference.
“We believe that the best way to counteract the current price increase is to implement continuous wage increases.”
Fast Retailing will report first-quarter results on Thursday. The company reported record profits for the year to August as growth in North America and Europe offset a slump in its largest overseas market, China, which had been slowed by measures to contain the pandemic. Continue reading
The company’s share price rose 1.4% in Tokyo trading, versus a 1% rise in the benchmark Nikkei index (.N225).
($1 = 132.4400 yen)
Reporting by Rocky Swift; Additional reporting by Maki Shiraki, Daniel Leussink and Miyoung Kim; Adaptation by David Dolan and Bradley Perrett
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