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Saturday, Jan. 22, 2011

EDITORIAL

Ending economic stagnation

Mr. Hiromasa Yonekura, chairman of the Japan Business Federation (Nippon Keidanren), and Mr. Nobuaki Koga, president of the Japanese Trade Union Confederation (Rengo), held talks Jan. 19, kicking off annual wage negotiations, known as "spring labor offensive." It is hoped that labor and management will jointly find ways to pull the Japanese economy out of stagnation and end the sense of helplessness that grips the nation.

In the meeting, Mr. Koga pointed out that aggregate wages have been on a downward trend since 1997 and that reduction of personnel costs will keep Japan in a trap of low economic growth and deflation. He said that major firms are on a path of recovery and that their internal reserves are abundant. (One report states that their internal reserves top ¥240 trillion.)

In view of the overall harsh economic conditions, Rengo, Japan's biggest labor organization, has forgone its traditional practice of uniformly demanding an across-the-board increase in the wage base. But it is calling for a 1 percent raise in the total payroll for workers, including allowances and a seniority-based automatic pay raise.

Nippon Keidanren, Japan's top business lobby, does not want to raise the total payroll, and instead places emphasis on securing employment in view of deflation and the strong yen. But it is ready to let firms continue to implement seniority-based automatic pay raises.

It opposes Rengo's view that an increase in the payroll will end deflation, saying that stiff global competition and the shrinkage of the domestic market due to a low birth rate and the graying of the population are causing deflation.

But to prevent the economy from spiraling downward, it will be important to both boost wages and improve employment. This would stimulate personal consumption and eventually contribute to increasing corporate profits. It will also be indispensable to improve working conditions of employees of small-to-midsize firms and nonpermanent workers. The planned reduction in the corporate tax will be meaningless unless the corporate sector make serious efforts to increase wages and employment.



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