TOKYO - Uniqlo parent Fast Retailing Co Ltd on Wednesday (Jan 11) said it would raise wages by as much as 40 per cent, in the clearest sign yet that Japan's rock-bottom salaries may be starting to budge after decades of deflation and cost-cutting.

The move by the casual clothing giant could serve as a wake-up call for Japan Inc ahead of annual spring labour negotiations. Prime Minister Fumio Kishida has repeatedly called for companies to increase wages, a plea that has gained urgency as households now face once-unthinkable increases in the cost of everything from food to fuel.

The poor state of pay has become arguably the greatest problem for the world's third-largest economy. In dollar terms, average annual pay in Japan totalled $39,711 (S$53,000) in 2021, well below the OECD average of $51,607 and little changed from the early 1990s.

"We welcome repors of companies that have announced aggressive wage hike policies," Hirokazu Matsuno, the government's top spokesperson, told a news conference.

"We believe that the best way to address the current increase in prices is to realise continuous increases in wages."

Uniqlo's move marks the first time in at least 20 years that the company, which operates more than 3,500 clothing stores worldwide, will revise remuneration across its entire group, a spokesperson said.

The change was aimed at making the company's work style and remuneration more globally competitive, the spokesperson said, adding that there was an "urgent need" to raise its pay in Japan, where it has remained low compared with its overseas operations.

From March, new graduate employees would be paid 300,000 yen ($3,000) a month, compared with 255,000 yen now, representing an annual increase of around 18 per cent, the company said. New store managers will see an increase of around 36 per cent, to 390,000 yen a month, it said.

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Uniqlo's ability to meet Japanese consumers' zealous demand for both relatively high quality and low prices has made it known for its "cosupa" - cost performance - turning the maker of 2,990 yen fleece jackets and 3,990 yen selvedge jeans into a global retailer and making founder Tadashi Yanai Japan's richest man.

Overall personnel costs in Japan would rise about 15 per cent from the previous year, taking into account an hourly wage hike for part-time workers that year, with the expense absorbed by productivity improvement, a company spokesperson said.

Fast Retailing is due to post first-quarter earnings on Thursday. It reported record profit for the year through to August, as growth in North America and Europe compensated for a slump in its largest overseas market, China, which had been slowed by pandemic containment measures.

The company's share price rose 1.4 per cent in Tokyo morning trade, versus a 1 per cent advance in the benchmark Nikkei index.

Source: Reuters