Keidanren (Japan Business Federation), Japan’s leading business organization, has included a call for “a wage hike of 3 percent” into its guidelines for member companies’ responses to demands that will be made by labor unions during this year’s “shunto” spring wage offensive.

Keidanren says it views the wage hike target proposed by Prime Minister Shinzo Abe as part of “social expectations” and urges its member companies to make positive responses to the leader’s call by offering pay increases in line with their earnings performances.

We welcome the business lobby’s willingness to encourage companies to boost wages.

But Yasumi Kudo, the Keidanren vice chair who announced the guidelines in a news conference, downplayed the implications of the move, which he said was intended only as a call for “greater efforts (for pay increases) than last year.”

“Even if a company ends up deciding on (a wage hike in) the 2 percent range, that should be no problem,” he also said.

If the association of employers inserted the wage target into its shunto guidelines only as a political gesture to avoid damaging its relationship with the Abe administration, the business community’s stance toward the issue itself should be called into question.

The Japanese Trade Union Confederation (Rengo), the national umbrella organization of labor unions, has demanded a 2-percent regular annual raise plus a 2-percent increase in base pay for a combined 4-percent wage hike.

A 3-percent overall pay raise would translate into a rise in base pay of around 1 percent, only half of Rengo’s demand.

If it talks about “social expectations,” the business community should first make sincere responses to workers’ demands.

Economic conditions have never been more favorable for wage increases compared to recent years.

The labor market is very tight as clearly signaled by such key labor indicators as the unemployment rate and the effective ratio of job offers to job applicants.

Japan Inc. is racking up record profits and building up its cash reserves.

On the other hand, however, the labor share has remained at record low levels.

In his New Year's news conference, Akio Mimura, chairman of the Japan Chamber of Commerce and Industry, said, “chief executives should be ashamed if cash reserves are growing at their companies.”

Mimura said major companies and other businesses that can afford to bump up wages should be willing to do so.

Japanese companies owe much of their strong earnings to the effects of policy support from the government, such as a weaker yen due to radical monetary easing and corporate tax cuts.

This is undoubtedly time for them to return more of their profits to workers through higher wages.

Pay growth is also important for Japan’s efforts to rescue itself from the deflation that has plagued its economy for far too long.

Consumer prices have risen 0.9 percent over the past year, and many economists have predicted a similar rise for fiscal 2018, which starts in April. Poor base pay growth could actually lower Japanese workers’ real wages.

As the main cause of the problem of weak consumer spending growth, Keidanren has cited people’s “anxiety about the future” due to the bleak financial prospects for the social security system and other factors.

That is probably true. If so, steady wage increases are all the more important for expansion of consumer spending.

The Abe administration’s initiative to reform the way Japanese work is another key topic for this year’s shunto round of negotiations.

From this point of view, it is crucial to improve the working environment and provide funds to systems to prevent cuts in overtime from lowering workers’ overall income. Equally vital are efforts to push up the wages of employees at small and midsize companies.

In a nutshell, Japanese companies are facing growing pressure to steadily raise the labor share.

Japanese chief executives should ask themselves whether their fixation on pumping up short-term profits is not serving as a major impediment to the nation’s stable long-term economic growth driven by growing paychecks and consumer spending.

--The Asahi Shimbun, Jan. 18