Wage bargaining in Japan: why employers and unions value industry-level co-ordination

The Japanese system of wage bargaining, known as Shunto, has attracted interest due to its superior macroeconomic outcomes (low unemployment and inflation). This paper examines the exact mechanisms for bringing about such outcomes by focusing on the nature of coordination among employers and unions at the industry and inter-sectoral levels. Based on interviews with Japanese employers and trade union leaders, this study found that: i) informal coordination among employers is more important than formal sanctions of employers'' associations; ii) systematic coordination takes place among employers and unions at the industry level, the inter-sectoral level, and within corporate groupings, which facilitate a clear understanding of how prices in labour and product markets affect the competitiveness of leading sectors in the Japanese economy; and iii) there exists a clear labour-management consensus that the export-dependent metal sector should remain the pattern setter during wage bargaining.