Japan-Western Cultural Differences Ver10. “European HQ Sets Salary Increases Based on Inflation. But Japan Is Now Required to Deliver Real Wage Growth.”
- shigenoritanaka3
- 4月20日
- 読了時間: 2分
Apr 20, 2026
Thank you for reading.
Today, I'd like to discuss a topic that surfaces every year in foreign‑affiliated companies in Japan: salary increase rates.
European headquarters often present country-specific salary-increase percentages, but the basis for these numbers is not always clear. As a result, the proposed rates frequently do not match the realities of the Japanese labor market.
🟦 Japan Has Moved from Decades of Deflation to a Clear Inflationary Phase
Since the collapse of the bubble economy, Japan experienced a prolonged period of deflation. However, from 2022 onward, prices have risen continuously, and Japan has unmistakably shifted into an inflationary economy.
In response, the Japanese government has set “positive real wage growth” as a national priority and has urged companies to:
Raise wages at a rate higher than inflation.
Many Japanese companies are now working hard to deliver inflation + α salary increases.
🟦 But European HQ Applies a Western Logic: “Inflation Rate = Salary Increase Rate”
In many European countries, it is common to adjust wages in line with the Consumer Price Index (CPI). Therefore, HQ often refers to IMF or Eurostat inflation data and concludes:
“Japan's inflation is 2%, so a 2% salary increase is sufficient.”
However —
In Japan, inflation and salary increase rates do not align.
🟦 Japan Has a Separate Indicator: the “Salary Increase Budget”
In the Japanese labor market, there is another important benchmark: the market average salary increase rate, also known as the Salary Increase Budget.
This is published annually by:
Mercer
Willis Towers Watson
Nikkei
The Japan Institute for Labour Policy and Training
And in many years:
Salary Increase Budget ＞ Inflation Rate
In other words:
In Japan, “inflation = salary increase” does not hold true. Companies must align with labor-market competitiveness, not just CPI.
🟦 What Happens When HQ Sets Salary Increases Based Only on Inflation
For Japanese subsidiaries, the consequences are serious:
Real wage decline
Rising living costs not covered by salary
Lower employee motivation
Loss of top talent
Difficulty attracting new hires
Declining competitiveness of the Japan business
In short:
What European HQ considers “fair” becomes “unfair” in Japan.
🟦 What's Needed Is a True “Think Global, Act Local” Approach
Global headquarters can set the overall framework. But local details must be discussed with the local entity.
This is the essence of:
Think Global, Act Local.
If HQ sets salary increases based solely on inflation— without understanding Japan's market salary levels, cost of living, and hiring competitiveness— the Japanese subsidiary will inevitably weaken.
European HQ must adopt a more flexible and inclusive approach: listen to local voices and respect local market data.
🟦 Summary
Japan has shifted from long-term deflation to inflation
The government is calling for “real wage growth”
Japan's market salary-increase rates often exceed inflation
HQ-driven inflation-based increases result in real wage cuts
This leads to lower motivation, talent loss, and reduced competitiveness
Global sets the direction, but local realities must shape the details
Now more than ever, Think Global, Act Local is essential
🟦 Contact
For inquiries regarding organizational management, cultural differences, or HR systems in foreign-affiliated companies in Japan, please feel free to contact:
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