TOKYO — 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 labor-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 (BoJ) 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 part-timers for 2025, outpacing the baseline 5% target set by Rengo, the nation’s largest union.

Talks over 2025 wage levels typically conclude around March, and go into effect up to a few months afterwards.

“Solid wage hikes will help put the Japanese economy on a growth track,” said Tamon Nishio, UA Zensen’s general secretary.

“Many of our union members are from small and medium-sized firms and are part-time workers. We want wage hike momentum to spread broadly to our members to achieve real wage growth and create a positive cycle for the economy.”

Economists and executives, however, point to a number of doubts and potential downsides with this momentum, including rising costs for retailers and uncertainty whether workers would be willing to spend their windfall.

“The big pay hikes will boost our cost burden,” Takaharu Iwasaki, president of Japan’s largest food supermarket chain Life Corp., told reporters.

“But with competition to hire and retain workers intensifying, we want to reward them with solid pay.”

The company is targeting wage hikes in 2025 similar to the previous year’s 5% for regular employees and 6% for part-timers.

Retail conglomerate Aeon 8267.T is also considering raising hourly pay for the group’s 420,000 part-timers by 7%, the same pace as last year.

“We want to continue raising pay mainly for part-timers as we did last year and the year before,” Executive Officer Motoyuki Shikata said on an earnings call on Jan. 10.

“We’re hearing from field managers that pay hikes over the last two years have helped hire workers.”

DOUBTS AND DOWNSIDES
These wage increases are beginning to make themselves felt in retailers’ bottom line.

At Life, labor costs rose 7.9% and net profit fell 3.4% in the nine months through November. Aeon slipped into a net loss in the same nine-month period, with wage hikes increasing its labor costs by 42.7 billion yen ($270.6 million).

The retailers have had little choice, as Japan’s working-age population continues to shrink from its peak of 86 million marked in 1995. A government think tank projects the population between the ages of 15 and 64 will drop about 20%, to 62 million, in the two decades through 2040. The pool of potential part-time female and older workers is also shrinking.

Additionally, there are doubts as to whether wage increases would translate into higher spending, especially with inflation tending to outpace wage growth. Without higher spending, companies would find it difficult to raise prices.

“Retailers are raising wages to retain workers, but it’s questionable whether they can keep doing so beyond this year,” said Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting.

“Consumers did accept a certain degree of post-pandemic price hikes at retailers. But there are emerging signs they are getting tired of unabated price rises and shifting to discount stores for shopping,” he said.

Indeed, workers do not appear to be in a spending mood.

“Our cost-saving mindset is so strong, I don’t think higher pay would change people’s spending pattern that much,” said Miwako, a part-time worker at a major supermarket chain in Tokyo who asked to be identified only by her first name.

She said that, while she is hopeful her pay will keep rising, she would plan to save any pay raise rather than spend it. — Reuters

MUMBAI — In India’s polluted northern city of Kanpur, Rajat Ghai has a penchant for Rado watches and Louis Vuitton shoes. Now, as the 31-year-old entrepreneur builds his dream home, he is indulging his designer tastes with a luxury bathroom.

Mr. Ghai will spend $28,000 on designer fittings from American giant Kohler and Japan’s Toto, installing a jacuzzi bath tub, showers with steam features and a multifunctional toilet with a heated, temperature-control seat and an automatic deodorizer.

“Japan’s toilets are so futuristic and hygienic, it was like we were in a different world. I wanted to bring that experience home,” said Mr. Ghai, recalling a visit to Japan that inspired his purchase.

“I really spend time here, I can relax, I can be with myself. So I want it to be cosy and relaxed.”

India is emerging as a hotspot for Kohler, Toto and Hansgrohe, the German manufacturer renowned for its taps and showers. The bathroom hardware companies are planning more stores, striking deals with developers and stepping up production in the world’s most populous nation as incomes grow.

UBS says that by 2028 India will have some 1 million millionaires, more than in Singapore, Hong Kong or Brazil.

In some ways, the luxury boom is emblematic of India’s divides.

The World Bank’s most recent estimates — from 2022 – showed 11% of India’s population still defecated in the open.

But even as millions of Indians cut spending in the face of inflation, the newly rich are not afraid to splurge. Indian sales of Mercedes-Benz cars hit a record high last year and so did deals for multimillion-dollar apartments in big and smaller cities.

Luxury homes accounted for 26% of total residential sales last year, more than three times the level of 2020, according to Mumbai-based Anarock Property Consultants. The homes are mostly apartments in gated communities in India’s seven biggest cities that are priced above 15 million rupees ($173,000).

Kohler currently has three “experience centers” in India where customers can test water temperature settings and shower pressure. It plans to open similar outlets across the major cities – potentially making India one of the biggest hubs for such centers — as well as many smaller stores.

“People are getting a lot more home proud than what they were before. They want to make sure they are spending more money on this entire sanctuary at home,” said Ranjeet Oak, Kohler’s managing director for South Asia.

Kohler describes India as its fastest growing market globally. Local sales rose to around $230 million in 2023-24, representing a compound annual growth rate of 17% from 2019, regulatory records show. Net profit grew by an annual average of about one third over the same period.

‘COMFORTABLE CLEANING SENSATION’
Even with India’s growth, China remains a bigger bathroom market, according to data from research firm Statista. It expects the Chinese market to expand about 11% over the five years to 2029 to $42.7 billion. India, meanwhile, is set to grow by about 9% over the same period to $12 billion.

In a statement, Toto said rising incomes and aspirations had driven demand for its bathroom products in India’s large cities.

It added that it would expand its dealer network by a third to 160 by 2025-26, especially in smaller cities “to grow our reach”.

For Kohler and Hansgrohe, the experience centers are at the heart of their strategy.

Located inside an old mill, Kohler’s outlet in Mumbai, a city infamous for slums that lack basic sanitation, is spread across 16,000 square feet, making it as big as three basketball courts. On display inside are a 1.6 million rupee ($18,500) Alexa-powered toilet with inbuilt tunes of chirping birds and a $5,800 wash basin decorated with hand-painted designs featuring a choice of Indian forts or jungle wildlife.

Hansgrohe will also open its first experience center in New Delhi this year. It already has 250 outlets in India, but will increase that to 400 by 2026, said Thomas Stopper, the company’s Asia vice president.

The manufacturer also plans to double its capacity at its existing assembly plant near Mumbai. Its supervisory board will visit India this year and be briefed about the possibility of making India a manufacturing hub, Stopper added.

“We see India as the biggest, last sizeable strategic opportunity of the future. It reminds me of China 20-30 years ago,” he said.

In Kanpur, Mr. Ghai, who made his money from call centers, is spending around $925,000 on his new home, which should be finished by late 2026.

Some of the bathrooms in the seven-bedroom four-storey house will have a “rain and mist shower” and Toto’s $2,313 toilet which comes with seat warming and a “comfortable cleaning sensation”.

His architect Kunal Gupta summed up the plan: “The client’s vision was to get an ultimate eye-candy yet functional luxury bathroom.” — Reuters

BANGKOK — Thailand’s new financial business law designed to attract foreign funds is expected to be submitted to cabinet by early February, a deputy finance minister said on Wednesday.

The law will create a “one-stop authority” agency to provide services to facilitate investment and promote Thailand’s aim to become a financial center, Paopoom Rojanasakul told a press conference.

“Thailand is open and ready to attract funds into the country,” he said, adding the law is expected to be completed later this year.

Business operators targeted in the financial hub plan will receive both tax and non-tax benefits, Paopoom said.

The target businesses are the banking sector, payment service, securities, derivatives, digital assets, insurance, reinsurance brokerage and related financial business, he added. — Reuters

DAVOS, Switzerland — JPMorgan Chase & Co bankers worked through the night in a “war room” to assess the impact of US President Donald Trump’s inauguration-day executive orders, while global markets braced for volatility following his return to the White House.

Trump revoked nearly 80 executive actions by former Democratic President Joseph Biden within hours of his second presidential oath of office, including orders for an immediate freeze on new federal regulations and government hiring.

“The last 24 hours are showing there’s going to be a lot of changes we all have to digest,” JPMorgan Chase & Co head of asset and wealth management Mary Callahan Erdoes told a panel discussion at the World Economic Forum in Davos, Switzerland.

“At JPMorgan we have a war room set up to analyze and evaluate each and every one of these, so they have been up all night and are working on it.”

The white-knuckle business of trading global assets sensitive to Trump’s “America First” policies has resumed, brokers told Reuters, pointing to a rapid fall in the Canadian dollar against its US counterpart, seconds after the president said a 25% tariff on Canadian goods could land within days.

Such changes and a possible increase in market volatility – sparked by Trump’s unpredictable use of social media as observed in his first term as president – will require adjustments but, the bankers and traders said, rewards are there for those who can navigate this.

“Time will tell but a lot of this is exactly what you would do to have a very pro-business environment,” Ms. Erdoes said, reflecting on Trump’s early executive order to ban remote working for federal staff.

“Thank God the US government has done it, and hopefully that’ll keep us ahead of other governments in the world so we can continue to compete.”

Global trade flows will suffer from “interesting ructions” as the new Trump administration settles in, Standard Chartered CEO Bill Winters told the Davos meeting.

“We’ll see what comes through in terms of tariffs…but we know China is a big part of that in terms of having a gigantic export surplus, and that will be under attack from all parts of the world,” Winters said.

Chinese officials are hopeful their country can avoid a repeat of the bruising trade wars that drove a wedge between the world’s two economic superpowers during the last Trump administration in 2017-21, despite the returning president’s robust comments on potential tariffs during his campaign.

Big, globally-focused banks will be able to benefit from that disruption in their roles connecting between markets, Winters said, while locally-focused banks may struggle.

‘REGULATION HAS BEEN STIFLING’
As well as disruption from the change in administration in the United States, banks face a slew of fresh regulations they say impede their ability to fuel a push for global growth.

“Look, regulation has been stifling,” BNY CEO Robin Vince said. “It’s really against the whole purpose that governments around the world have in trying to enable growth for their countries.”

The Bank of England said on Friday it would delay tougher bank capital rules by a year to January 2027 to get clarity on what the United States will do under Trump, prompting the European Union to say it would also weigh its options.

The standards written by the global Basel Committee are the final set of international reforms designed to make the banking system safer after the 2008 global financial crisis, and are meant to be implemented by member jurisdictions.

“This is a good time to take a step back and think about what works in regulation and what doesn’t,” Winters said, flagging his skepticism about where so-called “end-game” Basel 3.1 bank capital regulation would land, given an array of delays and revisions announced in several major markets.

BNY’s Vince concurred. “We need the right regulation, it needs to be supportive, but it needs to be in furtherance of the growth goal,” he said. — Reuters