Japan Inc Weighing Pay Hikes? Little Sign So Far

November 11, 2013, 9:34 AM

Japan Inc Weighing Pay Hikes? Little Sign So Far

By Yumi Otagaki

In what are perhaps the world’s biggest, most public, and protracted labor negotiations, Japan’s top policymakers – from Prime Minister Shinzo Abe and Bank of Japan Gov. Haruhiko Kuroda on down – have for weeks been pressing the country’s executives to give employees their first base pay increases in years next spring. How’s it going so far? If weekend reports are any sign, not so good.On Saturday, the Yomiuri Shimbun daily said a survey it conducted recently of 105 top companies showed just a tiny fraction said they are considering giving raises – and barely a third even would raise one-time bonus payments. That, despite a surge in profits, aided by the Abe-Kuroda stimulus package, which has helped exporters by lowering the value of the yen, and lifted domestic demand with big new government spending.

On Sunday, a top officer at the Keidanren big business lobby batted away suggestions of higher pay for Japanese workers, as he spoke during a Sunday debate program on national broadcaster NHK.

While many companies are doing better than before, “individual cases are different,” said Keidanren Vice Chairman Koji Miyahara, chairman of NYK Group, one of Japan’s giant shipping companies. “Although a weaker yen is positive for many corporations, some are suffering from it,” Mr. Miyahara added.

Many economists and policymakers say that higher worker pay is the key to continuing the “virtuous cycle” of sustainable economic growth that Messrs. Abe and Kuroda are trying to create. While the stock market has risen and companies are reporting higher profits, these people say it’s essential for households to spend more and, in general, to feel more optimistic about their future finances – a new mindset that is unlikely to take hold unless salaries start rising again. Base pay decisions usually get made once a year, at the time of the annual spring labor negotiations.

With final decisions months away, there’s still plenty of time for the jawboning to have an impact. But it’s clearly going to take more effort. In the Yomiuri survey, just eight companies – 7.6% of those surveyed – indicated they are currently considering raising base salaries. That included Mitsubishi Motors Corp.7211.TO +0.37%, construction and mining equipment maker Komatsu Ltd.6301.TO +0.38%, andUnicharm Corp.8113.TO +2.85%, a maker of diapers for all age groups, from babies to adults. Mitsubishi Motors said in the survey the reason for a possible increase is to improve employees’ standard of living.

In addition, 24% – 25 companies – including Nippon Steel & Sumitomo Metal Corp.5401.TO +0.32%, plumbing fixtures maker LIXIL Group Corp.5938.TO +1.11%, and trading company Kanematsu Corp.8020.TO 0.00% are mulling raising one-time payments like bonuses.

Nippon Steel has upped its forecast for group pretax profit for the fiscal year ending March 2014 by ¥40 billion to ¥340 billion, on the back of robust domestic demand for steel as a result of increasing infrastructure projects. The steelmaker also reported a group net profit for the first fiscal half ended Sept. 30 of ¥115.5 billion, compared with the previous year’s ¥176.6 billion loss.

Mizuho Securities market economist Kenta Ishizu wrote in a Nov. 1 report that Japan’s winter bonus payments for the private sector will likely increase for the first time in five years.

He predicts on average bonuses per-employee will rise 0.4% from the same period last year to ¥367,000.

“The bonus increase could spike consumption temporarily. However, its sustainability will depend on the outcome of the annual wage bargaining in the spring,” Mr. Ishizu added.