Fumio Kishida, Japan's prime minister, urged businesses whose earnings have recovered to pre-pandemic levels to raise wages by 3% or more in labour discussions next spring, in order to generate a virtuous cycle of growth and wealth distribution.
Kishida also informed his "new capitalism" panel that the government would take steps to raise the wages of welfare employees including childcare workers, nurses, and caretakers by 3% continuously.
With the world's third-largest economy's recovery still uneven across sectors, Kishida promised to assist small businesses in passing on the costs of raw materials, energy, and labour to customers.
The wage raise plan is part of Kishida's strategy to tackle wealth disparities and redistribute wealth, as well as the government's efforts to alleviate the pain that rising oil and food costs are causing consumers.
"I anticipate that, at next year's labour discussions, those companies whose profits have rebounded to pre-corona levels will raise wages by 3% or more to kick-start new capitalism," Kishida said. "The government will do everything possible to create an environment that will support private-sector wage increases."
As a result of the pandemic's impact on corporate profitability, Japanese corporations offered the lowest wage increases in eight years in last year's wage discussions to set salaries for 2021.
Slow wage growth is one of the factors preventing the Bank of Japan from meeting its 2% inflation objective, as it reduces households' purchasing power and prevents businesses from raising prices.
Japan announced a record $490 billion spending package this week as part of efforts to support a still-stagnant economy, defying a worldwide trend of withdrawing crisis-mode stimulus measures. Funding was included in the plan to enhance government-set pay for nurses and social workers by 3%.