Faced with global downturn fears, Japan Inc avoids raising bonuses
* Wage growth crucial to defeating deflation
* Summer bonuses stall as "Abenomics" sputters
* Abe seeks minimum wage increase by 3% a year
By Tetsushi Kajimoto
TOKYO, Aug 20 (Reuters) - Three-fourths of Japanese
companies aren't raising annual bonuses this summer, a Reuters
poll found, a sign many see growth sputtering in the world's
third-largest economy as the U.S.-China trade war stokes fears
of a global recession.
In Japan, bonuses serve as a barometer of business
confidence, as companies prefer using them to adjust pay up or
down - boosting bonuses when business is good and slashing them
in tougher times - rather than tweaking base pay, which is hard
The Reuters Corporate Survey found 48% of Japanese firms
expected summer bonuses to remain unchanged from last year,
while 26% will raise them and 24% cut them. Some 2% have no
"We kept summer bonuses unchanged from last year, since we
could not expand sales due to labour shortages," a manager at a
transportation company wrote in a survey response.
The July 31-Aug. 14 poll results compares with a survey by
Japan's major business lobby Keidanren, which showed this month
that big firms are cutting bonuses overall by 3.4%.
"Bonus payments are relatively high given gains over the
past few years, but uncertainty over the global economy and
recent yen rises could make it struggle to raise further," said
Yusuke Shimoda, senior economist at the Japan Research
Institute, who reviewed the Reuters poll results.
Weak wage growth and tame consumer spending have hampered
Japan's efforts to climb out of two decades of deflation and
stagnation, keeping inflation far below the Bank of Japan's 2%
That could also raise concerns that Prime Minister Shinzo
Abe's plan to increase the national sales tax to 10% in October
from 8% could deal the economy a blow. A 2014 hike from 5%
triggered a deep downturn.
In a positive sign for wages, though, nearly two-thirds of
the firms in the Reuters survey agreed with Abe's aim of raising
the minimum wage to 1,000 yen ($9.42) an hour at an early stage
from the current national average at 874 yen, while 35% opposed.
"Those facing a labour crunch or employing part-timers may
face the need to raise wages to lure workers," Shimoda said.
"Companies may also be concerned about the weak purchasing power
of low-wage earners who could suffer from the planned tax hike."
Many companies said that by increasing the minimum wage
Japan can better cope with labour shortages, boost domestic
demand and raise labour productivity, which is the lowest among
G7 advanced nations.
"The United States carries out sizeable wage hikes every
year and confronts streamlining head-on. As a result,
inefficient corporations are weeded out," a manager at an
electric machinery maker wrote in the survey. "Japan must also
carry out reforms aimed at rationalisation through large-scale
The survey, conducted monthly for Reuters by Nikkei
Research, canvassed 504 midsize and large Japanese corporations,
of which some 240 firms responded on condition of anonymity.
($1 = 106.1400 yen)
(Reporting by Tetsushi Kajimoto
Editing by William Mallard & Shri Navaratnam)
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