"Our trade unions are not too militant. They are very conscious of being in the same boat with their companies."
The comment comes from Jiro Tokuyama, head of a leading economic research organization, and it succintly expresses the basic reason why Japanese leaders are not collapsing into panic over inflation this year.
With wholesale prices soaring and big increases expected for gas and electricity, inflation would seem to be Japan's biggest problem. Yet government and private economists are only mildly worried. Organized labor's customary restraint in seeking wage increases and the extraordinary productivity of workers are the main reasons.
Some experts speak of Japan as being virtually "inflation proof." Prices of raw materials and wholesale items shot up quickly after the latest round of international oil prices raises but they have not triggered the rise in domestic prices that other countries face.
"At this stage, there is no homemade inflation," observed the government's top economic planner, Isamu Miyazaki. "It is all imported." He offers two reasons: "moderate" wage increases and the "constant increase" in worker productivity.
Japan's labor movement is heading into its traditional "spring offensive," when most industry agreements are reached, with unions setting a minimum wage increase target of 8 percent. Most companies are expected to offer 6 percent and most experts think they will split the difference at about 7 percent with the unions.
That would be less than the cost of living increases anticipated in the coming 12 months by several private economic research companies, including Tokuyama's Nomura Research Institute which sees the consumer price index rising 10 percent.
Those predictions are matched by labor's own economic forecasts, but the unions do not even consider them. In formulating their demands, they abide by the previous year's modest rise in consumer prices, says Shizuo Mishima, director of the labor offensive's "joint struggle bureau." At the outset, then, the unions expect to lose ground in the coming year by their own calculations.
A major reason is that unions here consider their respective companies' economic health to be of paramount importance. "Japanese unions feel that if the company is in good shape, the union also does well," explains Mishima, who last fall examined union practices in the United States. "They are more worried [than American unions] about whether the company is doing well."
They also exercise restraint to avoid being accused of feeding the fires of inflation. That was the "principal theory" on which Japan's steelworkers based their 1980 wage demands, according to a steel union official.
The pattern that has developed in Japan since the recent increase of oil prices contrasts sharply with the experience in 1973-75, the period of the first "oil shock." The price increases then spread quickly throughout the economy, with the consumer price index shooting up nearly 25 percent in one year and labor following quickly with wage demands of between 20 and 30 percent.
On that occasion, the government threw on the brakes so sharply that the economy richocheted into a recession from which Japan recovered only by initiating a massive export campaign.
For a while, it seemed the same thing might happen this time. The oil price rise coupled with a depreciation of the yen, which made imports expensive, sent the costs of raw materials and most wholesale prices skyrocketing. Wholesale prices were 21 percent higher last month than a year ago and on top of that the government agreed to an April boost of 50 percent for electricity and 45 percent for natural gas.
But if the government economists are right, the inflation virtually stops there. Raw materials and wholesale items are most directly affected by oil prices but there has been only a modest increase in durable goods prices, where labor costs are more important than basic materials. Labor's modest wage gains last year and its high productivity rate, in effect, act as a barrier preventing higher costs from shooting through the economy.
Yoshikazu Takao of Nomura Research Institute adds, "It's easy to regain price stability if wages stay down."
Nomura is predicting a 10 percent increase in the consumer price index in the coming 12 months, but government planners consider that far too high. The Economic Planning Agency, estimate for last year, is sticking with a forecast of only 6.4 percent, one of the world's lowest. The U.S. inflation rate is running at 18 percent on an annual basis.