- Views Exchanged at the Meeting between Government, Management, and Labor Representatives
- Tariff Hikes by US President-elect Donald Trump
- Resumption of Visa Exemptions for Short-term Visits to China
- Comprehensive Economic Measures
- The Annual Income Barrier
- Political Funding
- Monetary Policy
Views Exchanged at the Meeting between Government, Management, and Labor Representatives
(In response to a question regarding discussions at the talks between government, management, and labor representatives [held on Nov. 26]) Two topics were discussed: the spring wage negotiations between labor and management next year, and the medium-range target for an increase in the minimum wage.
Regarding the spring wage negotiations between management and labor, for two years running, we have witnessed the largest monthly wage increases in the past 30 years. Whereas 2023 marked a "launch" phase with powerful momentum behind the drive for wage hikes, 2024 was a major "acceleration" phase in that trend. At the talks, we stated that we want 2025 to be an "establishment" phase that helps this trend take root and pave the way for structural wage increases.
Additionally, we cited the need to improve conditions for full-time and fixed-term employees at small and medium-sized companies, which together account for about 70 percent of the nation's entire workforce. In addition to calling for the full adoption of policies in keeping with the idea of offering equal pay for equal work and considering promoting contract employees to full-time status, encouraging SMEs to implement price pass-through was another major topic. Moreover, we need to foster broader awareness of the importance of price pass-through, including labor costs, and as a social norm commensurate with the value-added in quality goods and services, not only in transactions between large firms and SMEs, but also those between SMEs themselves and between SMEs and consumers.
Looking ahead to the wage negotiations between labor and management next spring, by the end of January, we intend to finish the 2025 Report of the Committee on Management and Labor Policy with a message calling for recognition of wage hikes as an important step toward improving basic worker conditions, and we hope to launch a promotional drive aimed at familiarizing the public with its content such as through a lecture tour covering around 60 locations nationwide.
Regarding the minimum wage, participants at the meeting were unanimous about the need to raise it, given the reality that the current minimum wage in Japan is relatively low by international standards. However, in contrast to the wage levels set by private companies on the basis of mutual agreement between labor unions and corporate management, the minimum wage applies to all companies under provisions of the Minimum Wage Act, with the harsh fact that penalties are meted out for violations. Given that point, while it would be nice to declare a bold target, setting and promoting a target that cannot be met is something I think we want to avoid. In recent years, hikes in the minimum wage have had a major impact. I would prefer that all interested parties share their views on this topic, and ultimately, that the government move forward with steps to create a climate that will allow the minimum wage to be raised at an early date.
(In response to a question asking whether the stage has been set for achievement of the government's target of at least 1,500 yen for the nationally weighted average minimum wage by the end of the 2020s) That stage has not yet materialized. I presume all parties involved will share their views and explore definitive proposals going forward.
(In response to a question about the process of setting the minimum wage by the Minimum Wage Council, a tripartite body whose members represent the public, corporate management, and labor) My understanding is that a proposal to revise the decision-making process for the minimum wage was brought up in a recent meeting (November 12) of the Council for Promotion of Regulatory Reform as a topic for future study. However, it seems strange that the process for setting the minimum wage would be a topic for discussion by that Council. Under provisions of the Minimum Wage Act, minimum wages at the local level are determined through considerations for (i) the local cost of living for wage-earners, (ii) local wage levels, and (iii) the normal wage solvency of local businesses. Hence, decisions on the minimum wage should be determined through meetings of the tripartite Minimum Wage Council on the basis of these considered factors.
Tariff Hikes by US President-elect Donald Trump
(In response to a question seeking comment on the announcement by US President-elect Trump that he intends to impose additional tariffs on imported goods from China, Mexico, and Canada) At present, it is not clear what the actual conditions and tax rates will be for the implementation of these reported additional tariffs. Currently, many Japanese firms have set up local manufacturing operations on the assumption that no tariffs would be applied, in principle, between the US, Mexico, and Canada under terms of the United States-Mexico-Canada Agreement (USMCA). If tariffs are put into effect, fears are that these Japanese companies would face a huge impact. We want to watch and see how the Trump administration's policies in this area unfold.
As an economic superpower, if the US were to raise its tariffs, not only would many countries be impacted, but the US itself would likely face a major impact from the countermeasures its trading partners implement in retaliation. We strongly hope the US, as a member of international society, will demonstrate its leadership in supporting the rule-based, free and open international economic system.
(In response to a question seeking the Chairman's thoughts on the use of tariffs as a bargaining chip to resolve pending issues between nation-states) It is not possible for me to weigh the merits of the additional tariffs as reported because the specific conditions and tax rates under which they would apply are not yet known. Prioritizing the economic benefits for one's own nation by pursuing diplomacy through transactional negotiations, or "deal diplomacy," is one of the tactics President-elect Trump is known for. How and when individual nations counter that approach will be something they decide at their own initiative.
Resumption of Visa Exemptions for Short-term Visits to China
(In response to a question seeking the Chairman's take on the announcement by the Chinese government that it would resume visa exemptions for short-term Japanese visitors beginning November 30) We welcome this announcement. It will facilitate easier travel from Japan to China and can be expected to stimulate business.
(In response to a question about the background of the resumption of visa exemptions) Citing the coronavirus pandemic, China implemented a temporary measure suspending the visa exemption policy for short-term visitors. In July 2023, it began gradually easing the temporary measure and has since resumed offering visa exemptions for short-term visitors from over 20 nations. Now, eligibility for visa exemptions has at last been re-extended to Japanese travelers. In addition to spurring human exchange, this move probably also is intended to help stimulate the Chinese economy through increased business activity.
Comprehensive Economic Measures
(In response to a question seeking the Chairman's views on the government package of Comprehensive Economic Measures [approved by the Cabinet on November 22]) The gap between supply and demand in Japan has all but disappeared, and what we need now are initiatives aimed at bolstering the economy's supply-side capacity. My impression is that this latest package of comprehensive economic measures is sweeping in its content and scale and will lead to an expansion in domestic investment that boosts the nation's potential growth rate. The measures also include resuming subsidies for electricity and gas and continuing with a downsized subsidy for gasoline.
However, in view of the importance of supplanting the tradition of formulating single-year budgets with a dynamic economic and fiscal management policy that strives for fiscal balance with systematic investments over the medium and longer term, government investments in important initiatives should primarily be appropriated in line with the initial budget, with supplementary budgets limited to responses to disasters and other emergencies.
Japan's finances are in dire straits. Its outstanding national debt has surpassed 250% of GDP, and the ratings of its long-term government bonds is the second lowest among the G7 nations, following Italy. As we live in a world that charges interest, looking ahead, it will be critically important that Japan achieve fiscal discipline.
The Annual Income Barrier
(In response to a question seeking comment on the idea of lifting the so-called 1.03 million yen income barrier) In principle, we endorse the idea of increasing the disposable income of wage-earners and resolving the issue of working less hours due to the annual income barrier.
However, the 1.03 million yen threshold for income tax is not the only barrier; next, we have the 1.06 million yen and 1.3 million yen thresholds related to social insurance obligations. Further, given the currently poor shape of government finances, drastic cuts in sources of tax revenue would be problematic from the standpoint of fiscal discipline. We want the ruling and opposition parties to take these circumstances into consideration and discuss the issues of fiscal discipline, taxation, and social insurance together in the interest of working out an integrated solution.
Political Funding
(In response to a question about the suitability of political donations from companies and business organizations) The task of properly sustaining a political democracy is something that comes with considerable costs. Bearing in mind that democracy is a system of participation and accountability, it is only natural that corporations, as members of society, participate in the political process, that is, through voluntary donations. Furthermore, I think that political donations are one of the ways in which companies and business organizations fulfill their social roles. Even the Supreme Court ruling on political donations by Yawata Iron & Steel Co. indicates that political donations are a natural behavior to be expected of corporations as entities with an actual social presence.
However, a major precondition for political funds is that they be transparent and in compliance with established rules. In their future negotiations on further revisions to the Political Funds Control Act, I want to see the political parties engage in an exhaustive debate and be thorough in focusing on these two points.
Monetary Policy
(In response to a question about the Bank of Japan's monetary policy) The deflationary era is coming to an end. As consumer prices rise, the corporate sector must foster a favorable cycle between wages and prices by achieving gains in productivity and wage levels that outstrip the pace of inflation.
However, that virtuous cycle will not materialize within a climate of price volatility. I want to see the government and the Bank of Japan achieve an appropriate level of inflation around 2% through monetary policy normalization. The Bank of Japan is probably now engaged in a careful analysis of current trends in wages and prices. I want to continue watching to see what sort of monetary policy actions they decide to take, and whether that will include a hike in the policy interest rate.