Japan Press Weekly

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2013 April 10 - 16 [ECONOMY]

The key to deflation is increase basic pay: private think tank

A basic pay hike is the key to end deflation in Japan, a private think tank reported on April 5.

The Japan Center for Economic Research investigated the relationship between the Consumer Price Index and wages, and found that the fall in prices in Japan is caused by the decrease in wages.

Since the 1998 Financial Crisis, Japanese companies have cut their workers’ salaries during economic recession phases and increased low-paid non-regular jobs during periods of economic recovery. This is the cause of decreasing wages in the 2000s and later, the think tank concluded in its report.

In this year’s labor-management annual wage negotiations, some companies offered pay raises through an increase in seasonal bonuses. However, the institute pointed out that bi-annual bonuses do not encourage workers to spend more money as a rise in basic pay would because the amount of bonuses could easily go up or down depending on their company’s business performance.