Auto Worker Unions Seek Slimmer Pay Raises as Japan Economy Stagnates

By Staff Writer

Feb 18, 2016 07:40 AM EST

Eleven Japan auto workers unions are seeking slimmer pay raises from carmakers across the country. The labor unions are reducing demands from what they sought the previous year, due to economy stagnation and deflation faced by the country.

The labor unions, united under the Confederation of Japan Automobile Workers' Unions, has cut their demanded pay raise by half. Last year, they sought a 6,000 yen pay raise, which by now has been reduced to just 3,000 yen ($26) for the next fiscal year beginning in April. The unions had reached agreements with the automaker companies for 3,000 yen on average, started with the labor union of Toyota Motor Corp.

According to Bloomberg, automakers have kept a tight lid on wages even as they earn record profits. Japan auto workers only get a 0.1 percent raise last year. Adjusting with the inflation, the incomes are actually dropping by 0.9 percent. The drop in earnings have been going on for the past four years following economy stagnation, despite the fact that wages had been increased in the previous two years following automaker unions' demands for a raise.

Reuters noted that the annual wage talks are seen as crucial for the ultimate success of Prime Minister Shinzo Abe's aim to generate growth and defeat deflation. Prime Minister Abe has been struggling to spur growth and drag the country out of stagnation by boosting domestic demand, which makes higher incomes important to help support the country's economy.

However, the unions are considering current economic conditions in adjusting the demands in pay raises. "Taking into account slowing inflation and uncertainty over the economic outlook, we can't demand bigger rises in base salary just because our company logs record profits. We should seek higher bonuses when short-term profits rise, rather than base salary, which cannot be unwound in times of a business downturn," said Toyota union's spokesman Yasuyuki Takaki.

According to Nikkei Asian Review, Japan's economy shrank more than expected, especially in the final quarter of last year. One of the major factor that contribute to the economy stagnation is the decrease in consumer spending. The significant drop in exports also worsened the condition, damaging the financial market across the country with a continuous effect.

The raising of workers' wage is one of Prime Minister Abe's stimulus policies to generate a positive financial flows in the country by boosting domestic spending. However, most of Japan's automaker company had failed to substantially increase labor earnings properly. This year, auto workers unions and automaker companies had agreed on only 3,000 yen pay raise out of the demanded 6,000 yen last year.

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