December 8, PRESIDENT Online published an essay by economist Kazuo Mizuno titled “It’s Clearly Strange That Japanese Wages Aren’t Rising.” As preparations for the 2025 Spring Wage Negotiations progress, both labour and management may find his perspectives worth considering.

https://president.jp/articles/-/88870?page=1

According to Mizuno, “Japanese labour unions have failed to demand adequate wage increases aligned with productivity growth over the past few decades, particularly since 1997.” As a result, he argues that workers have effectively “abandoned the wages they should rightfully receive.”

To summarize some points, “Before 1997, Japanese wages increased in line with productivity. However, globalization and changes in corporate profit structures since then have disrupted this balance, leaving wage growth disconnected from productivity gains.”

“From 1956 to 1996, Japan’s labour productivity grew at an average annual rate of 4.8%, while real wages per worker rose at an annual rate of 3.4%. This means real wage growth kept pace with about 70% of productivity gains.” “After 1997, productivity growth slowed considerably to an annual average of 0.5%, yet real wages declined at an average annual rate of -0.7%.”

The significant cause of the quarter-century-long decline in real wages lies in the overwhelming strengthening of capital’s power and the implementation of employment flexibilization policies, which have led to an increase in non-regular workers.

The management’s basic stance on wage increases is that “wage hikes should be within the scope of productivity improvements.” However, in reality, “while the nominal value-added productivity of large corporations grew at an annual rate of 0.7% from fiscal year 2003 to 2022, the per capita labour cost decreased by 0.1% annually. This indicates that management has, over two decades, consistently acted in direct contradiction to the principle they claim to uphold—that wage increases should align with productivity growth.”

RENGO (The Japanese Trade Union Confederation) should not limit its demands to wage increases for the current year. Instead, it must also demand compensation for the portion of labour costs that has not been adequately adjusted in line with past productivity growth. Otherwise, workers will be giving up the wages that have accompanied productivity improvements over the past 20 years.

The Three Guiding Principles of Productivity were proposed by the Japan Productivity Center in 1955 as essential guidelines for promoting the productivity movement. These principles have played a pivotal role in shaping post-war labour-management relations in private enterprises. The three principles are as follows:

1. Expansion of employment – In the long term, improving productivity should lead to expanding employment. However, from the standpoint of national economy, a public-private partnership is essential in formulating valid policies to prevent the unemployment of surplus personnel through job relocation or other measures.
2. Cooperation between labour and management – Labour and management must cooperate in researching and discussing specific methods to improve productivity in consideration of specific corporate circumstances.
3. Fair distribution of the fruits of productivity – The fruits of productivity should be distributed fairly among labour, management, and consumers in line with the state of national economy.

These principles became a backbone of Japan’s industrial growth, fostering stability and trust in labour-management relations while supporting economic development.

Fair distribution of the fruits of productivity served as the foundational approach to wage increases during Japan’s post-war period of high economic growth. The follow-up rate of real wages to productivity growth, estimated at 70%, can be seen as a reflection of this principle in practice.

Mizuno’s proposal is that the outstanding portion of the fair distribution of the results that have been forgotten for nearly 30 years should be requested in the wage negotiations after 2025.

The Japanese government aims to achieve a growth-oriented economy by overcoming deflation, and its goal is to create an economy in which wage increases steadily outpace price increases. In other words, if real wages do not steadily increase, purchasing power will not improve and it will be impossible to achieve a growth-oriented economy.

In the Spring Labour-Management Negotiations of 2023, the first significant wage increase in about 30 years was achieved, and in 2024 this trend accelerated. In 2025, labour and management must work together in earnest to “establish” structural wage increases.

As a focus of discussion, in order to achieve higher wage increases, it is important to focus not only on the rate of price increases and productivity improvements in a single year, but also on how to reflect the efforts and achievements of union members over many years.

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