Toyota Says Union Demand for Wage Increase Surprisingly High

Feb 19, 2014 10:05 pm ET

(Updates with union’s statement in fifth paragraph.)

Feb. 20 (Bloomberg) -- Toyota Motor Corp., Japan’s largest manufacturer and employer, said the wage increases labor unions have demanded going into annual negotiations this year were “surprisingly high.”

The carmaker will wait until the negotiations are finished before saying whether it will agree to the requests, Senior Managing Officer Naoki Miyazaki told reporters yesterday in Toyota City, Japan. He said improvement in the economy and the need to boost personal spending will be considered in the talks.

Toyota this month reported profit quintupled last quarter and raised its forecast for the year ending March 31 to an unprecedented 1.9 trillion yen, as economic policies under Prime Minister Shinzo Abe weaken the yen and boost earnings from cars exported out of Japan. Abe has urged companies to raise wages faster than gains in the cost of living, as rising consumer prices risk undermining his public support.

Toyota’s labor union, representing more than 50,000 workers, is negotiating for a net 4,000 yen ($39) average increase in monthly wages and annual bonuses valued at 6.8 months’ salary, or about 2.44 million yen. A final plan will be announced in March by Toyota.

Toyota Motor Workers’ Union said in a statement that its proposed demands take into account workers’ efforts, Japan’s improving economy and the nation’s sales-tax increase in April.

Toyota agreed last year to a union proposal for a 2013 average bonus of about 2.05 million yen, the biggest in five years. It paid a 2.51 million yen bonus in 2008, according to the workers’ union.

Company Costs

A 1 yen increase in salary costs the carmaker more than 2 yen, Miyazaki said. That’s because higher base pay raises the company’s costs for benefits including insurance, he said.

This year is the first time in 12 years that labor unions at all Japan’s carmakers are seeking an increase in base wages, which exclude overtime and bonus payments. They are all asking for yearly bonuses exceeding five months of salary, the first time in 15 years that unions have asked for the amount, Yasunobu Aihara, president of the Confederation of Japan Automobile Workers’ Unions, said this month.

Abe’s economic program, known as Abenomics, spurred a 51 percent advance in the Topix index of shares last year, and an 18 percent plunge in the yen versus the dollar.

The wage increases in Japan will probably fail to keep pace with inflation, highlighting risks that the nation’s recovery will stall, surveys of economists show. Base wages fell in December for a 19th straight month.

Abe Pressure

Labor cash earnings, the benchmark for wages, will increase 0.6 percent in the year starting April 1, according to the median forecast in a poll of 16 economists by Bloomberg. Consumer prices will climb five times faster, increasing 3 percent, as Japan raises a sales tax for the first time since 1997, a separate Bloomberg survey shows.

The prime minister has pressed companies to pass some of the windfall to workers through higher base pay, in meetings with corporate and union leaders since September.

In an interview in December, Abe said he wanted wages to rise more than prices. He said Feb. 17 it would be best if pay were to increase by 2 percent or 3 percent.

--With assistance from Anna Mukai in Tokyo. Editors: Dave McCombs, Young-Sam Cho