Japan Press Weekly

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2013 February 6 - 12 [ECONOMY]

Economists seek gov’t wage hike measures to end deflationary recession

Economists at major business think tanks have claimed that government measures to increase workers’ wages and stabilize people’s income are necessary to put an end to the prolonged deflationary recession.

Prime Minister Abe in his economic policy argues that a target of a 2% increase in the consumer price index, which will be achieved through such measures as unlimited monetary easing, will boost consumer spending, expand the economy, and finally end the deflation.

Dai-Ichi-Life Research Institute chief economist Kumano Hideo in his column posted on the institute’s website on January 21 and 22 pointed out that since 1992, Japan has experienced a 2% raise in commodity prices only two times, at the time when the oil price rose sharply and when the consumption tax rate was increased to the current 5%.

Kumano said that a government wage increase initiative will become a strong trigger to get out of the deflationary economy.

In his column released on January 9 on the Mizuho Research Institute’s Internet site, chief economist Sugiura Tetsuo stressed that after the 1990s, Japan’s economic structure changed to one under which people are facing a decrease in job opportunities, a state of stagnant living standards, and a growth in non-regular employment despite the growth of real GDP.

Since the 1990s, even though corporations have increased their profits, they have lowered the percentage of profits distributed to their employees, he said.

Senior executive fellow of Fujitsu Research Institute, Nezu Risaburo points out that in this year’s annual wage hike struggle, the government should work to obtain a positive attitude toward pay raises from businesses because if workers’ wages remain at the low levels, the government’s monetary easing measures will fail to revive Japan from the deflation.

Nezu on the FRI Internet site column on January 29 and 30 said, “The total amount of workers’ wages is 245 trillion yen, accounting to 52% of the 473 trillion yen of Japan’s GDP. A 4% wage hike will cost 10 trillion yen. The money that companies have accumulated as cash on hand and in banks amounts to 215 trillion yen. Using 10 trillion yen of their internal reserves for higher wages will have very little negative impact on business management.”