This year's annual labor-management wage negotiations have effectively gotten under way as Keidanren (Japan Business Federation) announced its policy toward the wage talks and organized exchanges between union officials and executives of major companies. As uncertainties deepen over the course of the world economy and large firms expect a steep slowdown in their earnings growth, many companies are reportedly becoming more cautious toward raising the base pay scales of their employees, which would lead to a long-term rise in their manpower expenses. However, the growing economic uncertainties are all the more reason why companies that can afford to offer substantial raises should do so in order to shore up consumer spending and domestic demand.

Concern has indeed intensified in recent months over the prospect of global growth — with the United States and China, the world's largest and second-largest economies, engaged in a bitter trade war of retaliatory tariffs. China's economy grew 6.6 percent in real terms in 2018, the slowest growth since 1990, when the nation was hit by international economic sanctions in the wake of the Tiananmen Square incident the previous year, while auto sales fell 2.8 percent for the first year-on-year decline in 28 years. As China's growth was dragged down by a slowdown in investments due to the effects of increased U.S. tariffs on Chinese exports, Japan's exports to China in December fell by 7 percent from a year earlier. The International Monetary Fund has cut its 2019 world economic growth estimate by 0.2 percentage point from the previous forecast in October to 3.5 percent, predicting slower growth in the U.S., China and Europe than in 2018.

The slowdown in the world economy has led major Japanese firms — which have earned record profits over the past few years on the strength of the weaker yen and brisk demand in overseas markets — to expect sharply lower growth in profits. According to a tally by Nomura Securities, some 300 listed non-financial firms estimate their consolidated net profit in the business year to March will grow a mere 2.8 percent from the previous year — compared with the 38.5 percent growth in the year to March 2018. The management of these firms may have reasons to be on guard in the wage talks this spring.