Japan's spring wage negotiations yielded strong results this year, but economists are questioning whether it will be sufficient to help lift the country out of its economic mire.
Annual labor-management negotiations, known as shunto, concluded on Wednesday. Toyota Motor, Japan's largest company by operating profit, announced that it will increase monthly pay by 4,000 yen, up from last year's wage hike of 2,700 yen. Panasonic employees will receive a base-pay hike of 3,000 yen, versus a 2,000 yen increase last year, and Nissan Motor offered a 1.4 percent, or 5,000 yen, raise. All increases exclude automatic increases in seniority pay.
The results mark two consecutive years of wage growth and are encouraging, Masayuki Kichikawa, managing director and chief Japan economist at Bank of America Merrill Lynch (BofAML), told CNBC on Wednesday.
However, two major questions remain: will small-and-medium sized firms (SMEs) follow their larger counterparts; can the increases offset the three-percentage-point increase in Japan's consumption tax last year?
Wage hikes are crucial to Prime Minister Shinzo Abe's goal of achieving 2 percent inflation. Since coming to power at the end of 2012, the Japanese leader has persistently asked corporates to increase hiring, raise salaries and lift capital expenditure as part of his plan to boost consumption, a task that became particularly hard after the April 2014 consumption tax increase tipped the country into a technical recession.