Japanese companies plan lower pay hike this year: Poll

Cash-rich Japan firms reluctant to share profits with employees
By Tetsushi Kajimoto
|hrreporter.com|Last Updated: 03/28/2017
Shinzo Abe
Japanese Prime Minister Shinzo Abe attends a joint news conference in Rome, March 21. REUTERS/Remo Casilli

TOKYO (Reuters) — An overwhelming majority of Japanese companies say they will raise wages at a slower pace than they did last year, a Reuters poll found, stymieing Prime Minister Shinzo Abe's attempts to boost the sluggish economy through higher wages and consumption.

As Japan's annual "shunto" wage hikes kicked in this month, the Reuters Corporate Survey found that only 19 per cent of businesses said they would raise monthly wages by two per cent or more, versus the 2.14 per cent average hike at big firms seen last year.

The figure combines the automatic pay increase from Japan's seniority-based employment system, in which salary rises incrementally each year, with an additional hike in base wages.

This is the first broad survey gauging corporate Japan's stance on wages after most major firms on March 15 announced the results of their wage negations with unions, offering the lowest base pay hike in four years of about 0.3 per cent.

In the monthly poll, conducted March 7-21, 63 per cent of companies said they would raise wages one to two percent this year while 18 per cent said gains would be less than one per cent.

The survey showed 42 per cent of firms plan no base pay hike at all this year. Some 40 per cent plan to raise base pay less than one per cent, with just 18 per cent projecting an increase of one per cent or more.

"Consumers face a tougher situation as prices will clearly rise reflecting the weaker yen and rebounding oil prices," said Taro Saito, director of economic research at NLI Research Institute, who reviewed the survey results.

Exports will support Japan, the world's third-largest economy, "but we cannot count on domestic demand," he said.

The survey, conducted monthly for Reuters by Nikkei Research, polled 531 big and mid-sized firms. Around 230 answered questions on wages.


Since Abe returned to power in late 2012 with a pledge to reboot the moribund economy with a mix of stimulus policies dubbed "Abenomics," he has urged companies to lift wages, hoping that would drive a virtuous growth cycle.

While companies responded by raising base pay for four straight years, the gains have been minimal - despite sitting on piles of cash.

In written comments, many businesses say they cannot afford to lift wages, and others say they are raising salaries to attract workers amid a labour crunch as Japan's population shrinks.

"We have no choice but to raise wages due to labour shortages. But the situation is quite tough considering the future," said a manager at a machinery firm in the survey, which companies responded anonymously.

The survey also found that slightly more than half of businesses are accepting foreign workers even though Japan has a restrictive immigration policy, particularly for unskilled labour.

Still, two-thirds of companies say they are reluctant to hire unskilled foreign workers with many citing language, cultural and legal barriers.

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