Thu, Mar 14, 2019 - Page 10 News List

Japanese firms offer smaller wage hikes

MURKY:The US-China trade spat, political uncertainty in Europe and a looming tax hike in October is causing corporations to remain cautious, an economist said

Reuters, TOKYO

Big Japanese firms yesterday offered smaller pay increases at annual wage talks as the economy sputters, tempering hopes that domestic consumption will offset external risks to growth.

Major firms are set to raise wages for a sixth straight year as Japanese Prime Minister Shinzo Abe kept up the pressure on businesses to boost pay in an effort to beat deflation that has dogged Japan for nearly two decades.

However, as economic growth slows, firms have grown wary about offering big pay increases, because that commits them to higher fixed costs at a time of uncertainty as company profits are leveling off.

Results of the shunto talks between management and unions — announced by blue chips in sectors like automakers and electronics — set the tone for wage hikes across the nation, which have implications for consumer spending and inflation.

“I worry the momentum toward wage hikes may weaken as underlying inflation remains weak and there is a strong sense of uncertainty,” Japan Research Institute senior economist Hisashi Yamada said.

“Uncertainty is high on the external outlook such as the US-China trade war and Europe’s unstable politics. On top of that, a national sales tax is scheduled to increase in October,” Yamada said.

A slowdown in the global economy, the trade spat and trepidation over the final shape of a deal to seal Britain’s exit from the EU have sharply increased strains on businesses worldwide.

Faced with the heightened uncertainty about the growth outlook, cautious Japanese firms usually prefer to offer one-off bonuses and other benefits depending on annual profits.

They tend to focus more on the annual total sum payment than fixed base salaries, which would determine retirement payment and pension benefits.

Bellwether Toyota Motor Corp, Japan’s largest automaker, offered a pay raise of ¥10,700 (US$96.21) on average, down ¥1,000 from last year, local media reported, underscoring growing pressure on businesses.

Electronics giants, such as Panasonic Corp, offered a base pay raise of ¥1,000, down ¥500 from last year.

A survey by the Institute of Labor Administration, a think tank, predicted that wage growth will slow to 2.15 percent this year, pulling further away from the 17-year peak of 2.38 percent in 2015, despite hefty cash piles at Japanese corporations.

A Reuters Corporate Survey last month found a slim majority — 51 percent of firms polled — saw wages rising about 1.5 to 2 percent this year, versus last year’s 2.26 percent average across all Japanese industries.

In the coming fiscal year from April 1, Abe’s government is to start to implement work-style reform to curb Japan’s notoriously long work hours.

The reform also includes “equal pay for equal work” aimed at narrowing the pay gap between full-time employees and contract workers or part-timers, and raising the retirement age to cope with the aging population.

The move has shifted focus away from pay hikes with both unions and management, dashing policymakers’ hopes of stoking a virtuous cycle of a tight job market boosting wages to stimulate consumption and spur inflation to the Bank of Japan’s 2 percent target.

Japan’s unions tend not to be so aggressive in pressing their demands as those in the West because they attach greater importance to job security and retain a sense of company loyalty.

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