The Star – March 17, 2016 – TOKYO: Japan’s major companies are giving lower wage increases next fiscal year as Prime Minister Shinzo Abe’s efforts to boost the economy falter.
Toyota Motor Corp agreed to increase monthly base salaries 1,500 yen (US$13) in the year beginning April, according to a statement from the company. That compares with a 4,000 yen hike this fiscal year.
Panasonic Corp and Hitachi Ltd have also both agreed to a 1,500 yen wage increase next fiscal year, according to separate statements from the companies. That’s half their hike for this business year.
Japanese companies are struggling with slowing profit growth, a weakening global outlook and a strengthening yen, which threatens to cut profits earned overseas.
“The biggest reason companies are offering smaller pay increases is because profits aren’t rising as much as last year,” Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo said by telephone. “There are also concerns about the outlook for the economy, especially with uncertainty over China’s growth. On top of that we’re seeing hardly any inflation.”
Toyota’s resistance is the latest indication that the virtuous cycle sought under Abenomics – in which wage growth, higher consumption and price hikes combine to drive sustainable economic growth – may be stalling. Japan’s largest automaker predicts net income will increase 4.4% in the year ended this month, compared with 13.2% last fiscal year.
“The tide has turned,” Toyota president Akio Toyoda said after negotiations, managing officer Tatsuro Ueda told reporters yesterday. “It started with production rate increases and competitiveness and is expanding to changes in the exchange rate and stronger than expected environmental regulation in emerging countries.”
Nissan Motor Co, Japan’s second-largest carmaker, reduced its wage hike to 3,000 yen for next fiscal year, the company said, compared with 5,000 yen this year. Honda Motor Co agreed with its union on 1,100 yen raises, compared with 3,400 yen for this fiscal year, according to a faxed statement from Japan’s third-largest carmaker.
“The virtuous economic cycle that Abe has sought isn’t working well,” said Hiroaki Muto, chief economist at Tokai Tokyo Research Centre Co in Tokyo. “With Japan’s economic outlook dimming, company management can’t be aggressive about wage hikes that increase fixed costs.”
Kirin Holdings Co, Japan’s second-largest brewer by market value, is one of the few companies bucking the trend, with its first wage increase in 15 years.
The beer maker agreed to increase wages by 2,000 yen, the first base pay increase since 2001, as the company achieved its goal of halting shrinking market share and booked higher profit than expected, Daigo Yamazaki, a spokesman for Kirin Holdings, said by phone yesterday.
Japan’s steelmakers, which negotiate wage increases once every two years, are also increasing base salaries for next fiscal year.
Nippon Steel & Sumitomo Metal Corp, the nation’s largest, would increase wages 1,500 yen a month next fiscal year, compared with 1,000 yen this business year, the same as JFE Holdings Inc, the second-biggest, the companies said separately. — Bloomberg