Delivery trucks are parked at a parking area along the highway in Chiba, east of Tokyo, Japan April 6, 2023. REUTERS/Issei Kato/File photo
TOKYO — As Japan’s big companies prepare to hand out their heftiest pay hikes in decades, trucking firm owner Ikuko Sakata feels like she inhabits a different reality.
Despite facing some of the country’s tightest labour markets and no shortage of demand, small delivery companies like Sakata’s can barely afford to make ends meet.
The Tokyo-based company that she runs pays its about 80 employees the minimum wage, putting their base salaries at around 280,000 yen ($1,900) a month before overtime.
“That’s the best we can do,” said Sakata, who took over the 73-year-old family business from her father in 1995. She hopes to do better for the coming year but is afraid that might be difficult.
Sakata’s predicament contrasts starkly with the rosy picture emerging for workers’ pay at brand-name companies such as Toyota Motor and Nippon Steel.
READ: Toyota Motor agrees to biggest wage hike in 25 years
It also raises questions about whether the time is right for Japan’s central bank to finally normalize monetary policy, with sustainable wage increases seen as one of the conditions for an end to negative interest rates.
Interest rate hike bets
Most economists expect the Bank of Japan to raise interest rates – for the first time in 17 years – either this month or next.
Wrapping up their annual wage negotiations on Wednesday, Toyota, Panasonic, Nippon Steel and Nissan were among major firms that agreed to fully meet union demands.
Workers at major firms have asked for annual increases of 5.85 percent, topping the 5% mark for the first time in 30 years, according to Japan’s biggest trade union grouping, Rengo.
READ: Japan Inc set to offer big wage hikes, paving way for end to negative rates
The government is counting on such wage hikes to trickle down to smaller and medium-sized firms, which account for a whopping 99.7 percent of all enterprises and about 70 percent of the country’s workforce. Wage talks for the bulk of small- to mid-sized companies are expected to conclude by the end of March.
However, among smaller delivery companies, only 57 percent are planning any wage hikes in the fiscal year from April, according to a Japan Chamber of Commerce survey published last month. Of those, less than a third plan to raise wages by 3 percent or more.
READ: Japan’s major union wins big pay hikes for some members
Experts say the proliferation of players in the industry due to a wave of deregulation in the 1990s was partly to blame for the sector’s unique strains.
Feeble bargaining power
“There are many small companies in the freight industry and as a result, they have weak bargaining power,” said Uichiro Nozaki, an economist at Nomura Securities.
The government has recognized the problem and is taking steps to crack down on the strong-arming of subcontractors. It has also put in place policies to raise standard freight rates and make sure workers are compensated for non-driving duties, in a bid to raise the industry’s wages by around 10 percent.
But another law change taking effect next month to limit overtime to improve truckers’ notoriously grueling hours is feared to, ironically, drive away workers who have long relied on the extra hours to make a living, exacerbating the staffing crunch, industry insiders have said.
Tetsuyasu Kondo, who heads a trucking company in the northern prefecture of Akita, said companies like his need to pass on rising costs to their customers to be able to afford higher pay.
After offering an industry-beating base salary hike of 4.5 percent last year, Kondo said he hopes to raise wages by a margin that would at least exceed inflation this year.
For smaller businesses like Sakata’s in Tokyo, though, asking shippers to pay more could mean losing business.
“We do try to negotiate price increases, but they’re never met in full,” she said. “At best it’s 50 percent, and most of the time, it’s 20 percent to 30 percent.”
($1 = 147.2700 yen)