Japan’s prime minister and central bank governor yesterday applied fresh pressure on companies to do their part in putting a sustained end to deflation by boosting wages and investment.
However, the head of Japan’s biggest business lobby offered only conditional support, underscoring the difficulty policymakers face in convincing risk-shy Japanese companies to divert more of their record profits to innovation and human resources.
At an annual meeting of the business lobby Keidanren, Japanese Prime Minister Shinzo Abe voiced hope that companies would raise wages next year at a faster pace than this year, saying that boosting salaries and capital expenditure was critical for Japan to exit deflation.
Photo: Kyodo News via AP
Bank of Japan Governor Haruhiko Kuroda also waded in, telling the same meeting that companies who invest now are the ones to be rewarded when the central bank’s aggressive money printing succeeds in accelerating inflation to its 2 percent target.
“Fortune favors the bold,” Kuroda said, citing a famous proverb and stressing that more companies need to be spending more on new innovation and raising salaries to lure talent in a tightening job market.
Kuroda also said the central bank remains “unwavering” in its determination to do whatever it takes to hit its 2 percent inflation target, suggesting his readiness to expand monetary stimulus if risks threaten a broad uptrend in prices.
Despite assurances by Kuroda that Japan’s economic prospects are bright, many companies are sitting on a huge pile of cash because of uncertainties over the external outlook and a shrinking domestic market as the nation’s population ages rapidly.
In the meeting, Keidanren chairman Sadayuki Sakakibara praised Abe’s efforts to reflate growth and his pro-business policies, such as a pledge to cut the corporate tax rate, but he said companies had the flexibility to decide to what degree and how employees should be compensated, signaling that smaller and less-profitable firms may opt to pay one-off bonuses rather than increase base salary.
“Each company faces a different business environment,” Sakakibara said.
“I’d like to urge companies to take measures that best suit their needs,” he said, adding that companies did not necessarily need to raise regular pay.
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