Japan's SMEs could be election losers as parties pledge wage hikes

"It's already hard to cope with minimum wages of 1,000 yen," said Takeshi Nishimura, a manager at Big Yosan supermarket in Yokohama. "If it rises to 1,500 yen, that would make life even tougher for us small firms."

If you can't afford to pay a living wage to your employees, then you clearly have a rubbish business model, and deserve to go bankrupt. Zero sympathy.

Election time! 'Tis the season of promises destined for the bin as soon as normal service is resumed. ("Oh yes, we really wanted to raise wages! But it is difficult. We deeply regret the inconvenience to our woolly flock".)

SME?

Stingy Mean Ebenezers?

Just make minimum wage a legal requirement already.

Enough dillydallying.

"The average annual salary in Japan is $39,000..."

That is surprising; I had not realized that salaries in Japan are paid in dollars. Are those Australian dollars?

When a much larger minimum wage is introduced, more purchase power will for the masses, which will lead to more spending and business will increase across the board.

Nearly half the workforce, or some 28 million people, earn less than 1,500 yen an hour, so the labour force would 

… be nearly half minimum wage earners, if this happens. Brilliant!

Why not just go for 100,000 yen per hour? We nearly all be minimum wage workers but we’d all be rich! Genius…

One has to remember the that the true minimum wage is actually zero yen.

Nothing in economics happens in a vacuum. The Yen declined against a strong dollar, with tariffs, sanctions and pandemic repatriation staff shortages raising prices. That led to strikes in the UK where it was turbo-charged by Brexit, but increased poverty in Japan, where workers are less rebellious.

Raising wages will make people (briefly) feel better, but those wage increases will raise prices. Japanese SMEs generally have thin margins and little cash in the bank, so they will have to pay for those wage increases by increasing prices. That will again increase inflation. An inflationary spiral is inevitable.

The consequent shake-out will see some SMEs vanish as their elderly owners decide to retire rather than weather the economic storm. Remember, Japan has had deflation or zero inflation for a long time. Serious inflation is going to be a toxic shock for many. It will wipe out anyone who was just about surviving or were running with debts. Companies will also reduce their risk by cutting product lines, especially when a link in their supply chain goes under. Things will quietly vanish from the shelves. Stores will shutter.

Generally, the arms race between wages and inflation is always won by inflation. Inflation will make you poorer, which is why I used to post comments on how the 'demon' deflation wasn't really so bad.

Governments have fairly limited control over inflation, but having demonised 'deflation' for so long as a political gambit, the LDP may now take some flak as inflation bites. Hence the increased chance of state freebies, particularly as an election campaign bribe, er, policy.

political parties are promising to raise the minimum wage

we'll believe it when it actually happens.

always, nothing but talk from those clowns

"It's already hard to cope with minimum wages of 1,000 yen," said Takeshi Nishimura, a manager at Big Yosan supermarket in Yokohama. "If it rises to 1,500 yen, that would make life even tougher for us small firms."

I honestly don't care. Small businesses should either find profitable market niches for themselves offering specialised goods and services, merge with other small businesses or close down. These people have had politicians bend over backwards for them for so long that they don't have a clue what to do when they might suddenly have to face some hard realities.