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The owner of clothing brand Uniqlo, Fast Retailing, will be increasing the annual wages of its staff in Japan by up to 40 per cent, Japan Today reported.

The follows a call by Japan's prime minister Fumio Kishida for businesses to raise "stagnant" wages, according to the Financial Times.

Japan's core inflation, which does not include fresh food prices, rose by 3.7 per cent in November 2021, which is the fastest in the country in nearly 41 years.

Bloomberg further reported that the country's annual average wage was US$39,700 (S$52,800) in 2021, according to the Organisation for Economic Co-operation and Development (OECD),

This is below the OECD average of US$51,600 (S$68,700).

Starting pay for university graduates to be increased about 18%

According to a press release by Fast Retailing, the monthly starting pay for university graduates will be increased from ¥255,000 (S$2,600) to ¥300,000 (S$3,000), which translates to an annual pay hike of around 18 per cent.

In addition, the monthly salary of someone taking on a new role as store manager in their first or second year will increase from ¥290,000 (S$2,930) to ¥390,000 (S$3,950), an annual salary increase of approximately 36 per cent.

For other employees, the company plans to increase annual salaries by as much as 40 per cent, Fast Retailing added.

Uniqlo's owner added:

"Going forward, the new remuneration of each employee will be decided by globally aligned grade criteria.

Factors such as work performance and results, ability to contribute to the business, ambition and growth will be defined once again, and a fair grade evaluation will be realised through meticulous performance evaluation from one's supervisor, and a thorough evaluation from upper management and the HR department."

Japan Today further reported that the bonuses of Fast Retailing's employees are also expected to rise based on these changes.

Fast Retailing added that allowances based on positions will be eliminated in Japan, while a remuneration system based on elements such as base pay and a bonus determined by performance results will be implemented.

Domestic costs expected to increase by around 15 per cent

Fast Retailing added that prior to the current move, it had already amended the hourly wages of store staff in September 2022.

The Financial Times reported that these wages were raised by about 20 per cent.

Together with the current wage increase, total domestic labour costs for Fast Retailing is expected to increase by about 15 per cent.

Fast Retailing added that it will absorb the increased costs by boosting productivity, Bloomberg reported.

The firm's decision has been welcomed by Japan's Chief Cabinet Secretary, Hirokazu Matsuno, who further voiced his hope for other companies to follow Fast Retailing's example and raise wages "to the maximum extent".

Japan Today further reported that Fast Retailing posted a record net profit of ¥273.34 billion (S$2.76 billion) for the year ending on August 2022, an increase of 60.9 per cent from the previous year.

Much of the increase was attributed to strong overseas sales.

Top photo via Uniqlo Singapore/Facebook