By Tetsushi Kajimoto

TOKYO, Reuters – In the past five years Lasertec Corp from Yokohama has provided what Japan Inc has not in many decades: huge pay increases.

Since 2016, salaries have increased by around a third at the maker of chip-measuring devices. The average salary for employees at the main unit is just over 14 million Japanese yen (about $1121,00), which is more than three-times that of the national average, which stands at 4.3million yen.

Lasertec is one of a few Japanese businesses that specialize in technology. Lasertec pays based on employee performance, and is not determined by seniority, or base pay, as set out in the annual labour negotiations.

Although “shunto”, spring wage talks among big manufacturing companies and unions have enormous significance for the economic sector, especially this year, experts believe that more firms will opt for performance-based wages. This is an indication of a gradual shift taking place in Japan. For more details on the “shunto” talks click here

Yutaro Misawa is a Senior Executive at Lasertec. Lasertec’s profits have increased almost fivefold in the past five year and its shares are up more than 2,800%.

Misawa stated that attractive pay is a key factor in retaining talented engineers, particularly given Japan’s labour shortage.

For most of the third world economy’s top 3, wages are not as good. Companies, much like households, have a tendency to save money rather than spend because of decades of deflation. Japanese firms now have a record $2.8 trillion of cash and deposits.

The average Japanese annual salary was $38,515 dollars in 2020. This is well below the OECD median of $49165, and little different from the 1990s.

For the government to achieve stable inflation of 2%, higher wages is crucial. Fumio Kishida, Prime Minister of Japan, has asked companies to raise salaries to create a positive spending cycle. He is promoting “new capitalism” as a platform to promote greater wealth distribution.

LAGGARD?

Abalance Corporation, a renewable energy company has been actively hiring mid-career executives for the last three years. This has helped to increase the average Japanese salary by over 30%. The average salary for its roughly 100 Japanese employees – including non-Japanese and locals – is more than 7,000,000 yen.

Yuichi Kawaauchi, a senior executive, stated that it is crucial for companies to acquire talented workers from around the globe. Japan will continue to fall behind the rest of world if we keep things the same and don’t make Japan an appealing place to work.

While performance-linked pays can lead to bonuses being cut, this is not a good option for Japanese workers who are accustomed to stability. Unions often seek to increase base pay by incrementally increasing it, but this is not permanent.

According to the latest Reuters Corporate Survey, most firms do not plan on raising base pay during spring labour negotiations this year. According to the survey, only a few expect to see an increase in total pay.

Analysts say that this won’t suffice to meet recent increases in commodity prices, which will erode household spending power.

RAISING CHILDREN

Yamada Consulting Group is a mid-sized company that helps companies to restructure. According to President Keisaku Mazuda, attractive wages and perks help keep employees from getting fired.

Staff can work less to help their children’s education.

High-performance employees are in fierce competition. Masuda explained that they have increased the pay of high-performance workers and created better working conditions in order to avoid head-hunting.

The average salary was raised by 19% and 5% in 2020, and the average worker now earns 9.2 millions yen.

Japan’s Labour talks will ultimately shift from uniformly increasing base pay toward more flexible wages that are market-value based, Yuya Takada, a research analyst at recruitment and staffing company Recruit Holdings Co.

Even Toyota Motor Corp (NYSE:) Corp is no longer the pacesetter in the spring labour negotiations. This highlights the decline of importance of these talks.

Takada, Recruit said that seniority-based compensation will be gone.

This will reduce the importance of how management and unions fight for annual pay increases at base wages.

($1 = 115.4800 yen)