You are here
Japan blue chips, in blow to Abenomics, to offer smaller 2016 pay hikes
[TOKYO] Japanese blue-chip firms on Wednesday are set to announce wage hikes that undershoot last year's increases, a blow to "Abenomics" stimulus policy at a time fear of a deepening global slowdown and jittery markets are denting business sentiment.
Bellwether Toyota Motor Corp and some other leading manufacturers are to raise base pay for a third year in a row, under public pressure from Prime Minister Shinzo Abe.
But the gains this time look to weaken from the past year as unions and companies face slowing growth and sputtering inflation.
Unions tempered their demands, in line with the tougher environment, yet what companies will give is largely expected to be below those demands.
With the economy close to another recession due to weak consumer spending, Mr Abe has been counting on wage hikes to drive a virtuous growth cycle led by higher incomes and increased consumer spending and business investment.
But the closely watched annual "shunto" wage negotiations at major firms are likely to disappoint. "Wage growth will likely slow. It won't help boost consumer spending or push up prices either," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
Toyota is close to agreeing to a monthly base wage rise of 1,500 yen (S$18.30), half of the union's demand and far below the 4,000 yen gain given a year ago.
Major electric machinery makers such as Hitachi, Mitsubishi Electric and Panasonic Corp are set to halve this year's base pay rise to 1,500 yen, according to Japanese media.
A HARD STRUGGLE
The monetary "arrow" of Abenomics was meant to raise inflation expectations to 2 per cent and provide a mechanism to coordinate wage and price inflation, two International Monetary Fund officials wrote on Sunday.
"This has proven to be a hard struggle because companies and workers alike seem to look backward rather than forward in setting their expectations," said an article co-authored by IMF Japan mission chief Luc Everaert.
The article came against the backdrop of growing frustration in government against Japan Inc's resistance to significantly boost wages. "It's about time for overseas people to pile pressure on those Japanese companies that won't raise wages rightly," one senior official said.
In 2014, leading companies consented to an average wage hike of 2.19 per cent and last year brought a 2.38 per cent raise - a 17-year high.
With the momentum for higher wages waning, analysts expect pay rises to slow to just above 2 per cent at this year's shunto.