TOKYO: Representatives of the government, business sector and labour unions plan to take steps aimed at encouraging small and midsize firms to raise wages for their employees.

That was the crux of an agreement that emerged from a meeting of government, labour and management representatives at the prime minister’s office.

Participants agreed that large companies and their subcontractors will establish rules prohibiting large companies from putting an excessive burden on small and midsize companies as a result of steep increases in the price of raw materials. They also agreed to encourage small and midsize firms to raise wages, as their wage negotiations are moving into full gear after those of large firms.

Big firms have already seen large pay hikes in this spring’s negotiations.

Import prices have been increasing due to the weak yen, but this tends to put a burden on small and midsize firms rather than large ones. They cannot pass the higher cost along in their prices due to their weaker position when trading with large firms.

This structure is said to prevent wage hikes at small and midsize companies.

The government therefore promotes efforts to have large firms absorb the increased costs. The Japan Business Federation, Keidanren, will ask its large member firms to establish rules for the small and midsize companies with which they do business. It is unusual for Keidanren to ask its members to do something regarding business operations.

By arrangement with Washington Post-Bloomberg News Service

Published in Dawn, April 5th, 2015

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