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Exclusive-Japan Inc sees higher profits, but not wages, in year ahead -Breaking


© Reuters. FILE PHOTO: A employees sporting a face protect sells fish at Japan’s grocery store group Aeon’s shopping center because the mall reopens amid the coronavirus illness (COVID-19) outbreak in Chiba, Japan Might 28, 2020. REUTERS/Kim Kyung-Hoon/File Picture

By Tetsushi Kajimoto

TOKYO (Reuters) – A majority of Japanese companies anticipate to freeze or lower wages within the subsequent yr at the same time as many see earnings rising, a Reuters ballot discovered, illustrating how Japan Inc’s legendary thrift threatens Prime Minister Fumio Kishida’s drive to revive demand.

Extra broadly, the survey underscores essentially the most persistent drawback of the world’s No.3 financial system after many years of deflation: static wages that create a dangerous spiral the place shoppers hoard money and the financial system does not develop.

Kishida has mentioned he needs to see wealth extra broadly distributed and has known as for firms to elevate wages by 3% or extra to spice up shopper spending. A draft tax plan on Wednesday confirmed the federal government might deny tax breaks to firms that do not hike wages and enhance deductions for those who do.

Nevertheless, the Reuters Company Survey – which was carried out earlier than particulars of the tax plan emerged – confirmed firms might resist stress to boost wages, given uncertainty over the pandemic, rising international commodity costs and a weaker yen.

A complete of 54% of firms anticipate to maintain complete worker wages together with bonuses flat subsequent fiscal yr, whereas 4% plan to chop them. Some 42% anticipate to extend wages.

In distinction, 50% of companies see earnings rising.

“We wish the federal government to assist firms hit onerous by the fallout from COVID-19 till they get well power to boost pay,” a supervisor of a service sector agency wrote within the survey on situation of anonymity.

In a glimmer of hope for productiveness, the survey confirmed three quarters of companies would spend earnings on capital spending, adopted by analysis and improvement.

Solely 22% picked wage hikes as an possibility.

The Company Survey canvassed some 500 Japanese massive and midsize non-financial firms throughout the Nov. 24-Dec. 3 survey interval. Round 240 companies responded to the survey.


The outcomes are additionally notable as a result of final month’s company survey confirmed a slim majority of companies plan to or have already handed on greater prices to clients, suggesting costs might rise earlier than wages.

OECD knowledge exhibits Japanese workers’ wages have hardly grown over the previous 30 years, throughout which Japan suffered “misplaced many years” of stagnant development and grinding deflation.

The typical annual wage in Japan was $38,500 in 2020, beneath the OECD common of $49,200 and most G7 nations.

Since taking workplace in October, Kishida has piled stress on Japanese companies to boost wages, urging these whose earnings have returned to pre-pandemic ranges to boost pay by 3% or extra.

When requested to present a selected breakdown on the quantity of a deliberate hike or lower, solely 9% mentioned they might elevate complete staff’ wages together with bonuses by 3% or extra within the subsequent fiscal yr.

In a Reuters survey carried out in February, 45% of firms anticipated to maintain complete wages regular this fiscal yr, 35% mentioned they might elevate them and 21% mentioned they might lower.

“There is not any future for this nation until the entire Japan heads to boost wages,” wrote a supervisor at an industrial rubber producer. “Curbing wages have left behind issues similar to a declining beginning price.”

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