Keidanren to ditch gov't-requested pay raise target in 2019 negotiation with unions

TOKYO -- The powerful business lobby the Japan Business Federation, also known as Keidanren, has decided to exclude any numerical target for pay raises from its 2019 guidelines for annual spring salary negotiations with labor unions, according to people familiar with the decision.

Keidanren included such a target in its 2018 guidelines as requested by the administration of Prime Minister Shinzo Abe. The latest reversal is an expression of its fundamental position that wage negotiations should be "conducted between management and workers," as put forward by Keidanren Chairman Hiroaki Nakanishi, and not a government matter.

The practice of the government issuing a pay raise request concerning spring wage negotiations, which have been put out over the last five years, has triggered criticism as government intervention into business, and Keidanren intends to describe its aversion to the criticism in its new guidelines.

This year, Prime Minister Abe has yet to make a formal request to raise the pay for ordinary workers to the business community, and the 2019 spring negotiations could be a turning point for government moderation in the process. In 2018, the prime minister requested a 3-percent pay raise in an effort to push the Japanese economy out of deflation.

In response, the Keidanren guidelines that year stated that it was "desirable" for member companies to make "active considerations of societal expectations for a 3-percent raise," while also considering their profit margins.

In contrast, the 2019 guidelines will be devoid of a numerical target and will request members to make an active consideration for raises by taking into account the economic trends, corporate performances and employment situations, still with an eye on profits. The package will offer a broad range of options for raising the income of workers, like boosting basic pay, bonuses or paying a one-time allowance.

The Keidanren guidelines, included in a report made by a special committee on management and labor policies, were a subject of discussion at a meeting of senior members of the business lobby on Dec. 19. The document will be officially approved and made public in January 2019.

Prime Minister Abe began requesting leading business organizations such as Keidanren to raise pays for employees at their member companies in 2014. As for the 2019 pay negotiations, Chief Cabinet Secretary Yoshihide Suga told senior Keidanren officials to make "extra efforts" to increase salaries for workers ahead of the planned hike in the consumption tax from 8 percent to 10 percent in October 2019. The administration is eager to offset an expected economic downturn triggered by the tax hike.

(Japanese original by Mikako Yokoyama, Business News Department)