January 19, 2018

The Japan Research Institute of Labor Movement (Rodo-soken) on January 18 released its calculation indicating that a pay hike of 20,000 yen a month will boost national household spending by 8.4 trillion yen, stressing that a drastic pay raise is essential to stimulate the Japanese economy.

Rodo-soken is affiliated with the National Confederation of Trade Unions (Zenroren). As Zenroren will demand a 20,000-yen monthly wage hike in the 2018 spring labor offensive, Rodo-soken calculated how much the economy would grow if the Zenroren demand is achieved.

According to the Rodo-soken calculation, with an increase in monthly wages by 20,000 yen, Japan’s consumer spending will go up by 8.4 trillion yen, domestic production by 15.8 trillion yen, and gross added value, which is roughly equivalent to GDP, by 7.1 trillion yen.

In addition, the increased domestic production would create 930,000 more jobs. The national and local governments would be able to collect an additional 1.3 trillion yen in tax revenues in total.

Rodo-soken pointed out that the amount of funds necessary to provide a 20,000-yen pay raise to workers is only 2.1% of the 605 trillion yen in internal reserves held by all companies in Japan even when omitting the internal reserves held by financial institutions and insurance firms.

The labor thinktank also estimated the economic benefits of Zenroren’s other proposals, including an increase in the minimum hourly wage to 1,500 yen, the strict enforcement of labor rules such as the elimination of unpaid overwork, and the offering of regular employment contracts to non-regular workers. Rodo-soken said that each of these proposals is effective in encouraging people to spend more.