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Majority of Japan firms plan no wage hike, a blow to Abenomics: poll

Monday, January 23, 2017 - 07:13

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Nearly two-thirds of Japanese companies do not plan to hike their workers' wages this year, a Reuters poll showed, a blow to Prime Minister Shinzo Abe's campaign for higher pay to spur a recovery and a way to end two decades of deflation.

[TOKYO] Nearly two-thirds of Japanese companies do not plan to hike their workers' wages this year, a Reuters poll showed, a blow to Prime Minister Shinzo Abe's campaign for higher pay to spur a recovery and a way to end two decades of deflation.

The Reuters Corporate Survey, conducted Jan 4-17, also found that most wage gains over the past four years since Mr Abe came to power have been minimal and that nearly one-quarter of firms have implemented none at all.

In each of those four years, just before labour and management kick off their annual "shunto" talks - which set the tone for broader wages - Mr Abe has urged companies to raise wages to boost households' purchasing power and stimulate spending.

But Japan Inc has generally resisted Mr Abe's plea. Although the yen has weakened recently, many companies were hurt badly by last year's spike in the currency and are loath to commit to higher wages in the face of uncertainty amid threats about trade barriers by new US President Donald Trump.

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"Manufacturers' profits may expand this year given the current yen weakening, but that could change depending on what Trump says and does," said Hidenobu Tokuda, senior economist at Mizuho Research Institute, who reviewed the survey results.

As such, companies appear to opt to reward employees with one-off bonus payments after profits are secured, rather than promising a base pay raise.

"Without base pay rise, wage growth is unlikely to accelerate. On the other hand, prices may increase as oil prices rebound, which will curb (inflation-adjusted) real wages and hurt households' purchasing power," Mr Tokuda said.

The monthly poll of 531 big and mid-size firms, in which about 240 responded, found 63 per cent said they were not planning a base pay hike.

In Japan, an increase is pivotal for sustainable wage growth as the base salary accounts for the bulk of monthly wages. Base pay rises had been virtually frozen for over a decade since the early 2000s, until Mr Abe swept to power in late 2012 with a pledge to reboot the moribund economy.

Prices as measured by core consumer inflation excluding fresh food have risen roughly 3.5 per cent over the past four years. But much of that came from the 2014 sales tax hike to 8 per cent from 5 per cent.

But wage gains have so far been insufficient to offset higher costs of living, with real wages down 0.9 per cent in 2015, sliding four straight years and undermining private consumption.

The Corporate Survey also asked companies how much they have raised wages since 2012. Some 23 per cent said they have kept overall wages unchanged, while 51 per cent have raised them around 0.5-1.5 pe rcent.

Only 26 per cent said wages had risen by about 2 per cent or more.

"We cannot afford to raise base salaries, but we have no choice but to do so given government policy," wrote a manager of a transport equipment firm, who intends to offer a smaller raise than last year.

Managers answered on condition of anonymity in the survey, which was conducted for Reuters by Nikkei Research.

REUTERS

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