Toyota is projecting record profits for its fiscal year ending this month and the pay hike comes at the urging of Japanese Prime Minister Shinzo Abe who has worked diligently (some may say too diligently) to weaken the yen in an effort to battle the country’s long bout with deflation. In October of 2009, the country set a record with an inflation rate of -2.52%. At the end of January 2014, the inflation rate had risen to 1.4%.
When added to wage increases related to seniority and promotions, Toyota said its average worker would see a pay rise of 2.9%, well ahead of the country’s inflation rate and, the Prime Minister probably hopes, an encouragement to the Japanese to spend. Toyota also pays a yearly bonus to union employees equal to about 6.8 months salary according to a report at Bloomberg News.
Alas, some of the new cash going into workers’ pockets will be going to pay the higher taxes that Abe has pushed through. And this wage hike is only going to employees of top-tier Japanese companies like Toyota, Nissan, and Panasonic. For the country to overcome its deflationary past, workers’ pay needs to rise for all workers, including the 40% who work at informal jobs, according to Japanese trade union officials.
Toyota’s shares are down 1.1% in the mid-afternoon at $111.16 in a 52-week range of $99.70 to $134.94.
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