Japanese Automakers Raise Wages - Analyst Blog

Japanese automakers Toyota Motor Corp. TM, Nissan Motor Co. Ltd. (NSANY) and Honda Motor Co., Ltd. HMC have decided to increase the base pay of workers, following the Prime Minister's efforts to convince employers of the same. For the first time since the recession in 2008, Toyota is raising the base pay of the Toyota Motor Workers' Union members by 0.8% of last year's average salary or 2,700 yen ($26) per month. This is lower than the union's demand of a hike of 4,000 yen.

However, the automaker will also increase average wages by 7,300 yen due to seniority or promotions. Thus, the total raise comes to about 2.9%. Additionally, Toyota accepted the union's request to increase the average bonus to 2.44 million yen, which is also the highest since 2008. The Toyota Motor Workers' Union represents over 50,000 workers.

Meanwhile, Nissan agreed to increase the base wages by 3,500 yen and bonuses to 5.6 months of salary. Honda will increase the monthly base wage by 2,200 yen. However, Suzuki Motor Corp. is not raising its employees' wages, according to media reports.

The Japan Confederation of Automobile Workers' Unions revealed that more than 1,000 auto unions requested for wage increases this year. Moreover, the Japanese government is encouraging wage hikes to counter deflation.

Earlier this month, the Japanese labor ministry revealed that base pay excluding bonuses and overtime inched up 0.1% in January. This is the first year-over-year increase in 22 months. However, the overall pay declined 0.2% during the month.

While wage increases will help people to meet the increasing taxes and policies implemented by the government to fight deflation, the amount of increase might not be enough. Nevertheless, sustained economic growth will result in further wage hikes.

Toyota and Honda currently carry a Zacks Rank #2 (Buy). Nissan holds a Zacks Rank #3 (Hold).Tata Motors Ltd. TTM, which sports a Zacks Rank #1 (Strong Buy), looks promising in the auto industry.