Most leading carmakers, electronics manufacturers, shipbuilders and steelmakers have concluded this year's spring wage talks. Although they offered wage raises for the third straight year on improved earnings, the raises remain at last year's levels, failing to meet union demands for the most part. The yen's sharp appreciation, soaring costs for materials and fuels, and a bleak economic outlook due to the subprime mortgage crisis in the United States have made management cautious. Amid rising prices for consumer items including food, the wage hikes will do little to encourage consumption.

Labor repeatedly has called for aggressive pay raises to expand personal consumption for the sake of steady economic growth. The Japanese Trade Union Confederation (Rengo) points out that labor's share of corporate earnings has been on the decline for five consecutive years, with the economic fruits disproportionately distributed to executives and shareholders.

Prime Minister Yasuo Fukuda has often called on management to raise pay. At one time, the Japan Business Federation (Nippon Keidanren) said that a portion of the profits from productivity gains should be used to increase wages, raising the hope of decent wage hikes. But management came around to the conclusion that production costs, including wages, should be restrained so that international competitiveness will not be impaired. Thus, to minimize increases in fixed costs, it opted to offer rather generous bonuses while limiting pay raises.