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No.249 (2017/12/5)
Wage Hikes Key to Continued Moderate Growth of Japanese Economy

Japan's gross domestic product (GDP) grew 0.3% in the July-September quarter of 2017, according to preliminary data. The annualized ratio with a real seasonal adjustment was 1.4%. Japan's economy grew for the seventh straight quarter, its longest expansion since 2001, as rising business investment and a recovery in exports offset a decline in consumer spending impacted by prolonged rain and typhoons.

By GDP component, external demand, or shipments minus imports, added 0.5 percentage points to GDP, and business spending rose 0.2% from the previous quarter. But private consumption, which accounts for nearly 60% of GDP, fell 0.5%---the first quarterly drop in seven quarters.

Japan's economy is expected to continue its moderate growth rate, and economists are watching closely for signs that the tightest labour market in decades is beginning to bring about the higher wage gains needed to accelerate consumption. Minister of State for Economic and Fiscal Policy Toshimitsu Motegi noted that nominal GDP had risen to a record high and said he expected the gradual recovery to continue. Wage hikes in the next spring labour offensive will play a key role. Prime Minister Shinzo Abe is calling for a 3% hike in salaries in wage negotiations between management and labour unions next spring.

RENGO (Japanese Trade Union Confederation) decided at a meeting of its Central Committee on December 5 to propose wage demands totaling around 4%, consisting of a basic raise of around 2% plus the regular wage hike. RENGO recognizes that in order to realize a positive economic cycle, it is necessary to raise the wages of employed workers by about 2%. In monetary terms, from the perspective of correcting disparities with large companies, this means that unions in small and medium-sized firms should demand around 10,500 yen, the same as last year.

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