- Spring Labor-Management Negotiations
- The Minimum Wage
- General Election for Seats in the Lower House
- Policy on Nuclear Power
- Extended Trading Hours at the Tokyo Stock Exchange
- The Exchange Rate
Spring Labor-Management Negotiations
(In response to a question seeking comment on the broadly targeted wage hike of at least 5%, and of at least 6% for SMEs, that the Japanese Trade Union Confederation, or RENGO, is calling for in its basic plan for the spring 2025 wage negotiations) My understanding of the dynamic in play for the 2025 spring wage negotiations is that based on the gains seen with wage increases this year, RENGO is calling for a general target of 5% or more—identical to this year's level— and has set an SME wage hike target of at least 6% on the shared awareness that wage hikes among SMEs have been problematic.
Viewing 2023 as the "launch" phase that brought strong momentum in wage hikes, with 2024 marking a major "acceleration" phase in that trend, we want to make 2025 the "establishment" phase for wage increases and achieve a favorable cycle of wage and price growth against an inflation range of around 2%.
To that end, it is extremely important that we expand the number of companies participating in our Declaration of Partnership Building initiative and boost its effectiveness. Moreover, as a social norm, we need to foster broader awareness of the importance of proper price pass-through, including labor costs, not only in transactions between large firms and SMEs, but also those between SMEs themselves and between SMEs and consumers. Additionally, it will be important to promote transitioning fixed-term employees to regular employee status and ensure that companies fully comply with the laws mandating equal pay for equal work.
The Minimum Wage
(In response to a question regarding Keidanren's stance on raising the minimum wage) First, we need to distinguish between the hikes in monthly pay sought through the spring labor-management negotiations on the one hand and raising the minimum wage on the other. The first is a negotiation-driven process marked by delicate discussions between labor and management and aimed at establishing annual pay hikes as a social norm. However, the latter applies to all companies under provisions of the Minimum Wage Act, with harsh penalties meted out for violations. As such, declaring unreasonable targets for the minimum wage could invite confusion.
As put together by the Kishida administration, the Basic Policy on Economic and Fiscal Management and Reform 2024 calls for accelerated achievement of the government's stated target of raising the nationally weighted average minimum wage to 1500 yen by the mid-2030s. This was based on a shared awareness that joint public—private efforts would be made to establish the necessary climate for that increase. To meet that target by the mid-2030s, the minimum wage would have to be increased by around 4% every year. However, if the goal is to be met by the end of the 2020s, the annual increase would need to be 7.3%, and if it were to be met within the next three years, we would need annual increases of around 12%.
Declaring a challenging wage target and taking action to lift the minimum wage as much as possible is important. I think it will be great if this goal can be achieved ahead of schedule by pursuing actions aimed at creating the necessary environment.
General Election for Seats in the Lower House
(In response to a question regarding Prime Minister Ishiba's announcement, during the current election campaign period, of his intention to seek a FY 2024 supplementary budget exceeding last year's 13 trillion yen scale) Looking at Japan's macroeconomic climate, conditions are pointing to an upswing; nominal GDP for the April—June quarter of 2024 topped 600 trillion yen on an annualized basis, and the gap between supply and demand has practically vanished. The economy is close to meeting the government's 2% inflation target and literally on the verge of completely shaking off its deflationary pressures. Given this backdrop and in light of the comments made by the Prime Minister, I look forward to the implementation of measures backed by an adequate supplementary budget that reflect the realities for households hurt by the rising cost of living, specifically focusing on initiatives that provide support to those truly in need, contribute to gains in productivity and improved supply capacity, and aid disaster-stricken districts in their struggles to recover and rebuild.
(In response to a question seeking comment on the pledges made by candidates in the Lower House election—from parties other than the Liberal Democratic Party and the Constitutional Democratic Party of Japan—to lower the consumption tax) Japan's current government debt has climbed beyond 250% of GDP, which is a severe fiscal burden by any international measure. Although it is a fundamental position of our government that its finances must be dependent on the state of the economy, it will need to take steps to improve its fiscal health over the medium and longer term. It is essential that Japan secures the fiscal reserves that will prepare it for future emergencies like the next pandemic or natural catastrophe and strive to reduce the burden of the social insurance system on the working generation. In that sense, assertions that the consumption tax rate should be lowered to ease the cost of living seem a bit unrealistic. We want to see a robust and thorough debate on how best to balance the benefits and burdens of social insurance, as well as how to sustain the nation's fiscal base.
Policy on Nuclear Power
(In response to a question regarding the credibility of a statement, cited in Keidanren's recent proposal [released on October 15] for revisions to the nation's Strategic Energy Plan, to the effect that approx. 90% of respondents to a questionnaire aimed at selected Keidanren member companies had affirmed the necessity of restarting operations at existing nuclear power plants) That questionnaire survey was aimed at Keidanren member companies that have shown strong concerns about energy policy, and the response rate was about 35%. The statement in question basically refers to the 90% share of survey respondents that agreed on the necessity of restarting operations at existing nuclear plants; it does not claim that to be a desire expressed by 90% of all Keidanren member companies. The questionnaire survey's target and response rate were both clearly disclosed. There was absolutely no attempt to manipulate reader impressions of the survey outcome. Quite the contrary, it was a simple and straightforward release of information aimed at ruling out such misinterpretations.
(In response to a question regarding the need to restart operations at nuclear power plants) I think we should move forward with resuming operations at those nuclear facilities that have passed safety inspections by the Nuclear Regulation Authority and earned acceptance from their local communities.
In the years ahead, it is anticipated that the expanded utilization of AI and construction of new data centers will fuel a huge increase in demand for electric power. In that context, utilizing nuclear power to generate electricity is a necessity because it is a base-load power source and will contribute to the stable supply of clean energy. In addition to restarting operations at existing nuclear plants, it is hoped that Japan will develop and install next-generation nuclear reactors that help reduce the volume of high-level radioactive waste. Moreover, ultimately, Japan should strive to develop and install fusion reactors that will be safer and not generate any high-level radioactive waste.
Extended Trading Hours at the Tokyo Stock Exchange
(In response to a question seeking comment on the setting for proper dialogue between the market and corporates following the 30-minute extension of trading hours the TSE instituted from November 5) Up to now, many listed companies made their timely disclosures after TSE trading hours; my impression is that the period for that will now be moved back by 30 minutes. Generally, this should be acceptable if it ensures investors in Japan and abroad are still able to engage in equity trades based on appropriate information provided through timely disclosures.
The Exchange Rate
(In response to a question seeking comment on the yen's renewed softening trend against the US dollar) Due to inflows of speculative capital, a single comment by a VIP can easily spur large swings in the exchange rate. The important thing is to stay focused on the larger trend. I want to keep an eye on the business climate in Japan and the US and the policy actions taken by the central banks.