Uniqlo parent Fast Retailing Co Ltd (9983.T) on Wednesday said it would increase wages by as much as 40 percent, a sure sign that Japan’s rock-bottom salaries may be beginning to budge after decades of deflation and cost-cutting.
The move by the casual clothing giant is expected to increase focus on worker pay ahead of annual spring labour negotiations, although it seems unlikely that the rest of Japan Inc will deliver hikes on the same scale.
Prime Minister Fumio Kishida has constantly called for firms to raise wages, a plea that has gained urgency as prices have soared, leading to once-unthinkable hikes in the cost of everything from fuel to food.
The poor state of pay has become deniably the gravest problem for the world’s third-biggest economy. In dollar terms, average annual pay in Japan was $39,711 in 2021, well under the OECD average of $51,607 and little changed from the early 1990s.
“Fast retailing aside, there have been a number of companies that up to last year have significantly boosted their rate of pay increases. That’s a positive factor for the Japanese economy,” said Taro Saito, an executive research fellow at NLI Research Institute.
Still, he warned that Fast Retailing’s case was that of one company with the wherewithal to deliver sharp rises, which was not true of many other Japanese firms.
Fast Retailing’s move marked the first time in at least two decades that the company, which runs more than 3,500 clothing stores globally, would revise wages across its entire group, said spokesperson Pei Chi Tung.
The change was intended to make the company’s work style and wages more globally competitive, she said, adding that there was an “urgent need” to increase pay in Japan, where it has remained low in contrast to overseas operations.
From March, new graduate employees would be given pay of 300,000 yen ($2,300) a month, contrary to 255,000 yen now, representing an annual rise of around 18%, the company said. New store managers will see a rise of about 36% to 390,000 yen a month, it said.
Price Hikes
The wage announcement by Uniqlo happens a year after the company said it would have to hike prices for some products owing to higher costs for materials and shipping. In 2023, it hiked prices of down jackets and fleece goods in its autumn-winter product lines, in what was seen as something of a turning point for consumers.
Uniqlo’s capacity to satisfy Japanese consumers’ zealous demand for both relatively high quality and low prices has made it known for its “cosupa” – cost performance – turning the maker of 3,990 yen selvedge jeans and 2,990 yen fleece jackets into a global retailer and making founder Tadashi Yanai Japan’s wealthiest man.
But, like other Japanese firms, it is also struggling with a shrinking labour force at home.
“We believe this is probably down to inflation and Japan’s tight labour market,” said Oshadhi Kumarsasiri, an analyst at Lightstream Research who publishes on the Smartkarma platform.
Buy Crypto Now“In addition, the company’s aggressive expansion plans in markets such as the U.S. and Europe would mean that they will need to deploy some of the trained senior staff from Japan into those markets.”
Fast Retailing’s overall personnel costs in Japan would increase about 15% from a year earlier, taking into consideration a previous hourly wage increase for part-time workers, with the expense absorbed by productivity improvement, Tung, the spokesperson, said.
In the meantime, drinks maker Suntory Holdings has said it is considering hiking wages more than 6%, while Honda Motor Co Ltd (7267.T) has said it wants to address wage hikes “aggressively”.
The question is whether overall rises will be enough to offset recent spikes in food and other consumption items.
“We welcome reports of companies that have announced aggressive wage hike policies,” Hirokazu Matsuno, the government’s top spokesperson, told a news conference.
“We believe that the best way to address the current increase in prices is to realize continuous increases in wages.”
Fast Retailing is expected to announce first-quarter earnings on Thursday. It reported bumper profit for the year through to August, as growth in Europe and North America compensated for a plunge in its biggest overseas market, China, which had been weakened by pandemic containment measures.
The company’s share price jumped 1.4% in Tokyo trade, against a 1% advance in the benchmark Nikkei (.N225) index.
($1 = 132.4400 yen)
