Toyota and Honda Announce Biggest Pay Raises in 40 Years

Toyota and Honda, two titans of the Japanese automobile manufacturing, have reportedly agreed to grant their domestic employees the largest pay raise in decades. They are the most recent companies in the world’s third largest economy to raise wages in response to rising prices.

Japan’s inflation rate reached its highest level in over four decades, according to official data released last month. This has placed pressure on businesses and authorities to assist individuals as their purchasing power decreases.

Typically, Japanese companies hold wage negotiations with labour unions for several weeks before announcing their decisions around the middle of March. The automakers have not provided an explanation for why this year’s announcements were made earlier than usual.

According tot the BBC, Toyota announced on Wednesday that it will meet union demands for pay and bonuses, resulting in the largest wage increase in twenty years.

The incoming president of Toyota, Koji Sato, stated that he hoped the move would have a positive effect on the entire Japanese automobile industry and “lead to open dialogue between labour and management at each company.”

The company declined the BBC’s request for additional information.

In the meantime, rival automobile manufacturer Honda told the BBC that it had “fully responded” to union requests for wage increases and bonuses. The company announced a 5% salary increase, the largest increase since 1990 and above Japan’s inflation rate.

As starting salaries are increased, the majority of the additional funds will be distributed to younger employees, according to a Honda spokesperson.

“Despite the challenging business climate, management has a strong desire to foster an environment in which all employees can… advance with a sense of urgency,” the spokesperson added.

In January of this year, Fumio Kishida, the prime minister of Japan, urged businesses to increase wages to assist those struggling with rising prices. The owner of the fashion chain Uniqlo, Fast Retailing, announced in January that it would increase salaries in its home country by up to 40 percent.

Beginning in March, the company’s new pay policy will apply to full-time employees at its headquarters and company stores in Japan.

In Japan, price and wage growth had been stagnant for decades. In recent months, global inflation has increased as countries have eased pandemic restrictions and the Ukraine conflict has pushed up energy prices.

In December, the core consumer prices of Japan increased by 4% from the previous year, which was double the central bank’s target level and the highest rate in 41 years.

Toyota honorary chairman dies

Meanwhile, Shoichiro Toyoda, Toyota Motor’s honorary chairman who transformed the Japanese automaker into a leading global brand, died of heart failure on Tuesday, the company announced. He was 97.

Toyoda, a third-generation scion of the founding family who inherited its stake in the company, is credited with establishing a quality-control culture at the company, allowing it to grow into a world-leading automaker. He was also responsible for convincing Toyota, which began as a loom manufacturer, to produce vehicles in other countries.

Toyoda, who was born on February 27, 1925, paved the way for the Japanese automaker to become one of the most globally recognized brands.

Mr. Toyoda emphasized the importance of attention to detail, which is still ingrained in Toyota corporate culture. According to a Harvard Business Review study, Mr. Toyoda’s rules included turning off the company lights at lunchtime to save money and designing offices to maximize use and cost benefit.

Mr. Toyoda strictly enforced Toyota’s “just-in-time” inventory philosophy, which required factories to shift production models quickly in response to changing consumer demands as the company’s plants expanded outside of Japan.

Mr. Toyoda gathered all of the company’s executives in 1999, shortly before stepping down as chairman, to berate them for adopting a more American-style of worrying about the next fiscal quarter rather than focusing on longer-term goals.

Toyota grew its global presence under Mr. Toyoda’s leadership to join the top ranks of global car brands by the late 1980s, becoming one of the flagships of Japan Inc.’s economic powerhouse.