Japan Inc cuts bonuses to put more pressure on spending

[TOKYO] Japanese companies have pared back year-end bonuses for employees by the most since the global financial crisis, putting additional pressure on consumer spending amid signs of a slowing economic recovery.

Individual bonuses for employees fell by 9per cent to 865,621 yen (S$11,163.67), according to a weighted average of special payments by 164 large corporations tallied by major business lobby Keidanren. That's the steepest drop since 2009, when winter bonuses slumped 15per cent.

The thinner payouts are likely to serve another blow to seasonal spending following the decision by Prime Minister Yoshihide Suga to call a temporary halt to a domestic travel initiative around the New Year's holiday. The Go-To travel campaign has been one of the government's key tools for boosting consumption.

The bonus data also confirms the delayed response of Japan's biggest companies to reduce overall compensation amid the pandemic. Firms largely honored previously agreed payments in the summer. Bonuses then edged down 2.2per cent.

Service companies took a bigger hit with a 13per cent drop, compared with a 7.5per cent slide among manufacturers. Employees at two Japan Railway companies ended up with almost US$3,000 less in extra payments than last year, while steel workers took a 25per cent hit.

Japanese companies use bonuses to cut costs in a downturn while maintaining base pay and jobs for their salaried workers. Though unemployment has soared in many countries during Covid-19, the main jobless rate in Japan remains low at 3.1per cent.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Still, the economy needs consumer spending to continue fuelling the recovery. The government, already concerned that the economy risks losing recovery momentum, unveiled a stimulus package of more than US$700 billion earlier this month. But some of the impact of the measures is likely to be delayed with the travel campaign on hold amid concern it could be contributing to record virus cases.

BLOOMBERG