Japan wage growth gathers steam as reluctant retailers raise pay

TOKYO, Jan 22 (Reuters) - Japan's retailers, typically among the most tight-fisted of employers, are offering big pay increases for a second year in a row, meaning squeezed profits for companies, more spending money for workers, and a green light for more central bank rate hikes.

Japan's labour-intensive service sector had long managed to avoid making big or sustained pay raises, by tapping a vast pool of part-time, lower-paid retirees and housewives.

But that began to change last year as a rapidly shrinking working-age population and rising inflation made it harder for retailers - who employ 10% of Japan's workers - to attract and retain staff.

Their acquiescence to successive wage hikes, marking a breakthrough among low-wage service businesses and small manufacturers, has not escaped the notice of policymakers, including central bankers keen for signs that wage growth is taking hold after 25 years of stagnation.

"There was a lot of positive talk on the wage outlook," Bank of Japan Governor Kazuo Ueda said at a gathering of regional bank executives last week, referencing a meeting of BOJ branch managers the week before.

The central bank has predicated its latest cycle of interest rate hikes, including another expected at a policy meeting later this week, on a sustained "virtuous circle" of higher wages that support higher prices, for services as well as for manufactured goods.

UA Zensen, a group representing retail, restaurant, textile and other industry unions, is seeking wage hikes of 6% for full-time workers and 7% for ...
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