Economic Ministers of Japan and Prime Minister Shinzo Abe are building pressure on the companies in the country to increase the wages to help in economic growth. The economy of Japan is slowly travelling out of recession that was triggered by sales tax increase in 2014.
With the increase in wages, Abe is aiming to generate a virtuous cycle of higher corporate profits, consumption wages and investment to improve the economy. The PM is also aiming to break the two decade cycle of decreased growth and deflation. Abe in his policy speech expressed determination to have companies for raising wages with the help of labor employer negotiations.
Abe said, “To ensure the end of deflation, we put off a (second) sales tax hike to 10% by 18 months.” The Prime Minister added that the wage hikes will be applied by spring 2016 and a year later so that the recovery process reaches through every corner of Japan. Meanwhile Economics Minister Akira Amari and Finance Minister Taro Aso requested the companies to increase the wages and promote a virtuous growth cycle.
In 2014 the monthly average cash earnings had increased to 0.8% and posted the first gain in four years and also marked the fastest growth in 17 years.
Photo Credits: cnbc