Japan's Version of Income-Led Growth? Uniqlo Announces Up to 40% Salary Increase

Wages Lagging Behind Inflation... Decline in Work Motivation
Japanese Government "Welcomes Salary Increases for Economic Growth"

Fashion brand Uniqlo's Japanese headquarters, Fast Retailing, has decided to dramatically increase employee salaries by up to 40% starting in March. This comprehensive wage hike by Fast Retailing is the first in 23 years since 2000, and it is drawing attention to whether it will influence other companies' wage increases amid Japan's ongoing inflation.

Japan's famous fashion brand 'Uniqlo' parent company Fast Retailing has decided to increase employee salaries by up to 40%.
[Photo by AFP Yonhap News]

According to the Nihon Keizai Shimbun (Nikkei) and Kyodo News on the 11th, Fast Retailing announced a large-scale wage increase targeting approximately 8,400 employees. The raise rate is up to 40%, with the monthly salary for new employees rising 17.6% from the current 255,000 yen (about 2.4 million KRW) to 300,000 yen (about 2.82 million KRW). The monthly salary for newly appointed store managers will also increase 34.5%, from 290,000 yen (about 2.73 million KRW) to 390,000 yen (about 3.67 million KRW).

Although some Japanese companies like Canon have implemented wage increases, such a large-scale raise is unprecedented. Last September, Fast Retailing raised the hourly wages of non-regular and part-time employees working in Japan by an average of 20%. With regular employees' wages also increasing, the company's overall labor costs are expected to rise by 15%.

The company plans to eliminate the previous system of paying allowances based on position or work location and instead provide standardized base salaries and bonuses by grade both domestically and internationally. Furthermore, employee wages will be determined according to grade criteria based on future work performance results and contributions to the business. This decision appears to be aimed at preventing talent loss and boosting employee motivation amid a situation where inflation rates exceed wage growth rates.

The average annual salary of Fast Retailing's regular employees working in Japan is 9.59 million yen (about 90 million KRW), which is relatively high among Japanese retailers but lower than that of general trading companies or foreign firms. Fast Retailing expects that through this wage restructuring, the current compensation system?where employees working in the U.S. and Europe earn more than those in Japan?will be reorganized, facilitating smoother employee transfers between work locations.

Currently, Japan is encouraging companies to raise wages to stimulate economic growth. At a press conference on the same day, Hirokazu Matsuno, Chief Cabinet Secretary and government spokesperson, said, "We positively evaluate the reports that companies are actively raising wages," adding, "We will continue to realize wage increases that do not fall behind price rises."