Japanese Prime Minister Shinzo Abe urged companies to increase wages faster than gains in the cost of living to break the legacy of 15 years of deflation, and praised Toyota and Hitachi for pledging to help.
The Abe administration’s reflation efforts have succeeded in stoking exporter profits with a cheaper yen that’s sent the Topix Index of stocks heading for the best year since 1999, with a 46 % surge so far in 2013.
“What we want is for wages to rise more than prices,” Abe said in an interview in the prime minister’s official residence in Tokyo. “We want to enter a virtuous cycle as quickly as possible,” where economic growth propels corporate profits, employers raise compensation and workers spend more, he said. “Some companies are already responding. For example, executives at Toyota and Hitachi have promised a raise.”
The prime minister has called four meetings since September with union and business leaders to persuade them to build a consensus on the need for higher wages.
“We are aware of the role Toyota and the manufacturing industry as a whole are expected to play in revitalizing the economy,” Shino Yamada, a spokeswoman for the Toyota City-based company that is the world’s largest automaker, said today. “Based on these expectations, the workforce and management will discuss this issue based on a request from the labor union.”
Toyota, Japan’s largest manufacturer, last month predicted net income would rise 74 % to 1.67 trillion yen ($16 billion) in the year through March 2014, aided by a weaker yen. The currency has fallen about 22 % against the dollar since mid-November last year, when Abe kicked off his election campaign with a platform of reflation.