Thus, in Japan, sharing the cost of employment adjustments thinly and broadly in the labor market seems to be a factor of mild deflation. In order to realize sustainable increases in base salaries in Japan regardless of the economic situation, business leaders should be aware that they will have to face an increase in fixed costs, particularly during a recession.
This might increase their incentives to cut employees, although not as drastically as in the United States, to realize increases in base salaries and avoid a rise in fixed costs at the same time. As a consequence, these moves might lead to an increase in volatility in the unemployment rate.