Japan’s Rebounding Economy Is Finally Lifting Pay—but Resentment Runs Deep

Costco worker Kazumi Ishibashiri says she never experienced a pay increase at her previous job.
Costco worker Kazumi Ishibashiri says she never experienced a pay increase at her previous job.


The stock market has hit a record and the final piece of Japan‘s economic recovery is falling into place. The public wants to know why it has taken so long.

MEIWA, Japan—After three decades dominated by stagnation, Japan’s stock market has hit a record, and the final piece of its economic recovery is falling into place with the biggest pay increases since 1991.

The Japanese public, unimpressed, wants to know why it has taken so long.

Like the U.S., where concerns about higher prices have lingered well after the inflation rate cooled down, Japan presents a tricky case of inflation politics.

The Nikkei Stock Average recently set a new high after 34 years and the Bank of Japan is poised to end its eight-year experiment with negative interest rates, citing a healthier economy and inflation trends. Yet support for the government is plumbing new lows.

The clue to the puzzle lies in the way the country emerged from its long doldrums. Prices, big-company profits and corporate investment rose first. Pay increases lagged behind.

Wages are stickier than profits, and economists going back to Keynes have argued that during good times, employers tend to wait as long as they can to pass on their prosperity.

The Nikkei record “has nothing to do with me," said Reiko Sasaki, 45, who works part time at a supermarket in the northern prefecture of Iwate. She said her wages weren’t going up much.

“I have no choice but to pay for food so I save on daily necessities and other goods" such as by buying clothes on sale at the end of the season, Sasaki said.

Only now are signs emerging that average people, most of whom own no stock, are getting their share of the growing pie.

Major Japanese companies are planning to raise pay by an average of 5.28% this year, the largest increase since 1991 and higher than last year’s 3.58%, according to preliminary data released by the Japanese Trade Union Confederation on Friday. The group’s head, Tomoko Yoshino, called it a “first step toward a new stage in our economy and society."

Some big companies went further. Nippon Steel said it would raise monthly wages 14%, while the average increase at air-conditioner maker Daikin topped 8%.

Naomi Fink, global strategist at Nikko Asset Management, said such numbers could trigger healthier spending. “How do we get Japan out of its lost decades of deflation? Well, we need people to actually think they can afford to consume today," she said.

Higher pay at Costco

Nanami Shimamura, 23, quit his job near Tokyo last fall and moved to the countryside 50 miles north of the capital, where he works at a Costco store.

The U.S. company’s Japan unit has been a pioneer in lifting wages to above-market levels to secure ample labor.

Shimamura makes the equivalent of just over $10 an hour doing tasks such as restocking the snack shelves. That is well below comparable U.S. wages but $2 to $3 more than other employers in semirural Japanese areas. Living with his parents, he said he was spending $650 a month on his hobby of buying American street fashion, some of which he resells online.

“Now I can spend a bit more extra on what I like," said Shimamura.

Economywide, wage increases are just beginning to help average workers catch up to the higher prices they are paying for everyday items such as food and utilities. Real wages declined 2.5% in 2023. In January, the trend showed signs of improvement: Real wages were still down, but only 0.6%.

Many employers are waiting until they are backed into a corner by worker shortages.

Chikara Seguchi, who runs a home builder in the southern city of Kumamoto, said some employees, especially younger ones, have been leaving for better pay elsewhere. The area is home to a new Taiwan Semiconductor Manufacturing plant that has made labor scarce.

“Hiring competition has become very severe in Kumamoto," said Seguchi. Last year, he offered workers a 2.5% increase on average, lower than overall inflation. This year, he is planning increases of 4% to 5%, and he has started grading employees’ performance on an easier scale so they can get pay increases more quickly.

“Offering wages that are above the market—even in rural areas—helps us secure talent and stable long-term labor. As a result, productivity of each worker gets higher," said Yuko Nakagawa, a director in charge of human resources at Costco Wholesale Japan.

Virtuous cycle

The government and Bank of Japan have long sought to generate a positive loop of modestly rising prices and wages. While consumers may see any price increase as unwelcome, policymakers led by the late Prime Minister Shinzo Abe have believed that flat or declining prices produce a general malaise in which companies cling to their cash and refrain from investments to improve productivity. That means workers don’t get pay increases over the long run.

Price rises caused by pandemic-era supply-chain strains and the war in Ukraine jolted Japan into an inflationary environment, and even after the strains eased, a self-sustaining rise in prices has taken hold.

The fall in the yen since 2022 helps exporters including Toyota by raising the competitiveness of made-in-Japan products overseas, but it hurts consumers because they pay more for imported food and fuel. Household spending fell in 2023 for the first time in three years.

“Eventually we want to transition away from being ultra export-dependent," said Fink of Nikko Asset Management.

The approval rating for Prime Minister Fumio Kishida’s cabinet has fallen to around 20% to 25%, according to recent polls, near the lowest level in decades. Although that is partly caused by a political-funds scandal involving ruling-party lawmakers, economic unease has also hurt Kishida. A February poll by the Nikkei newspaper and TV Tokyo found only 14% of respondents thought wage increases this spring would outpace inflation, compared with 80% who didn’t.

Kazumi Ishibashiri, 39, another worker in the Costco store north of Tokyo, said she never experienced a pay increase at her previous job working in a warehouse and selling merchandise at concerts.

Now with her above-market wages and the prospect of a raise this year, she hopes to take more vacations to the southern island of Okinawa for her hobby of collecting pottery from the island. “To the extent my hourly wage goes up, I’ll invest a little more in that kind of thing," she said.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com and Peter Landers at Peter.Landers@wsj.com

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