JAPANESE blue-chip firms announced wage hikes yesterday that topped increases last year, but overall pay raises across corporate Japan are not expected to offset higher costs of living for workers or be enough to drive a sustainable economic recovery.

    Major exporters like Toyota Motor Corp. were responding for a second year to public calls from Prime Minister Shinzo Abe’s government for help in generating a virtuous cycle of higher profits, wages and prices to decisively end two decades of deflation and stop-start growth.

    Thanks to a weaker yen and Abe’s stimulus policies, blue-chip have made huge profits and boast record cash reserves, and the raises will likely allow pay to catch up with the inflation spawned by the easy money of “Abenomics” in the coming fiscal year, economists say.

    But import costs have risen on the back of a weaker yen and many importers as well as smaller firms cannot afford to pass on much of their costs to workers.

    “The spread of wage hikes will be largely limited to big firms,” said Hisashi Yamada, chief economist at Japan Research Institute.

    “A weak yen does more harm than good to small firms and those based in areas outside of Tokyo. And last year’s sales tax hike is still weighing on private consumption, forcing small firms to cut their selling prices.”

    Toyota said it plans to raise workers’ base salary by 4,000 yen (US$33) a month, up from last year’s increase of 2,700 yen and the biggest hike in over a decade, although it fell short of union demands for 6,000 yen.

    The offer amounts to an overall raise of 3.2 percent when combined with an automatic increases that vary depending on a worker’s length of service — typical in Japanese companies — of 7,300 yen.(SD-Agencies)