In contrast to many other countries, Japanese Prime Minister Fumio Kishida called for business leaders to accelerate wage rises, warning that the economy risked falling into ‘stagflation’ if pay rises lagged price increases, Reuters reports. Stagflation is a combination of a low economic growth and surging inflation, damaging households' purchasing power. "There are alarm bells warning that stagflation emerges if wage growth lags behind price hikes,” Kishida said. “The core of a virtuous economic cycle lies in wage growth. I'm calling for pay rises that beat inflation and the government will back such efforts.” He said guidelines would be drawn up in June to increase flexibility in the labour market, making it more attractive for workers, who are used to the notion of jobs for life, to change jobs and move to high growth sectors. The government is pledging to spend JPY 1 trillion (USD 7.56 billion) in the next five years on reskilling workers, while encouraging firms to make pay scales more flexible.

The Japanese Trade Union Confederation, known as Rengo, is demanding wage rises of 5% at this year's labour and management talks. Japanese firms tend to prefer one-off bonus payments for rewarding performance rather than raising fixed base pay, so they can easily adjust personnel costs in good times or bad. Masakazu Tokura, the head of Japan's largest business lobby Keidanren said achieving wage hikes centred on a base salary that doesn't lag inflation is the duty of the corporate sector.