Wage Increases and Economic Growth: Take Measures to Boost Corporate Investment

Editorial

15:00 JST, July 17, 2025

To realize wage increases that will overcome rising prices, it is essential to strengthen the earning power of companies. In the ongoing House of Councillors election campaign, political parties should compete with each other on strategies to boost investment for that purpose.

There is no question that large wage increases are necessary in the attempt to break the Japanese economy out of its long period of stagnation, also known as the “lost 30 years.”

However, while major listed companies have attained record earnings for four consecutive years, wage increases have not kept pace with rising prices. Real wages have been on a downward trend since spring 2022, in effect making the sense of stagnation more pronounced.

Under such circumstances, political parties are competing with each other through their plans for tax cuts or cash handouts to ease the immediate burden on household budgets.

The Constitutional Democratic Party of Japan and the Japan Innovation Party have proposed temporarily lowering the consumption tax rate on food to zero.

The Liberal Democratic Party and Komeito have pledged to provide ¥40,000 in cash to every child and to adults in households that are exempt from residential tax, as well as ¥20,000 to other members of the public.

However, these shortsighted measures will not be able to revive the Japanese economy. To expand the trend of wage increases, the economic pie for the distribution of wealth must be enlarged by achieving high economic growth. To that end, it is essential for companies to improve their earning power.

It is companies themselves that play the main role in raising wages. What is required of the government is a policy that creates an environment conducive to wage increases.

One of the reasons for the Japanese economy’s stagnation is the lack of corporate investment. It will be necessary to present a strategy and outlook that will encourage investment.

The world is undergoing a period of major change. The free trade system is being shaken by the high tariff policy of U.S. President Donald Trump’s administration. China has been strengthening its hegemonic moves, and economic security is becoming more important.

Under such circumstances, the LDP has identified key industries for the next 10 years and pledged bold investments in them. The CDPJ has proposed support for the domestic production of cloud systems and artificial intelligence. Aren’t both of these strategies insufficient for navigating this period of major change?

Political parties will be tested as to whether they can first show a broad direction Japan should take and then present concrete measures that will encourage a review of the supply chains and a return of manufacturing industries to Japan, among other changes.

One of the main reasons why the Japanese economy is suffering from high prices is that the yen has been excessively depreciated for a prolonged period. Behind the yen’s depreciated state is also a decline in national power. If the Japanese economy becomes strong by promoting investment, the yen’s depreciation can be expected to ease.

Reiwa Shinsengumi, Sanseito and others have advocated the abolition of the consumption tax. Consumption tax revenue amounts to about ¥25 trillion. It is a key tax that makes up about one-third of the nation’s tax revenues, and its abolition would result in a loss of confidence in the government’s finances. It would only serve to diminish the nation’s strength.

(From The Yomiuri Shimbun, July 17, 2025)