Breaking News
Investing Pro 0
Black Friday SALE: Up to 54% OFF InvestingPro+ CLAIM OFFER

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

Economy Dec 08, 2021 06:24PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A staff wearing a face shield sells fish at Japan's supermarket group Aeon's shopping mall as the mall reopens amid the coronavirus disease (COVID-19) outbreak in Chiba, Japan May 28, 2020. REUTERS/Kim Kyung-Hoon/File Photo

By Tetsushi Kajimoto

TOKYO (Reuters) - A majority of Japanese firms expect to freeze or cut wages in the next year even as many see profits rising, a Reuters poll found, illustrating how Japan Inc's legendary thrift threatens Prime Minister Fumio Kishida's drive to revive demand.

More broadly, the survey underscores the most persistent problem of the world's No.3 economy after decades of deflation: static wages that create a damaging spiral where consumers hoard cash and the economy doesn't grow.

Kishida has said he wants to see wealth more broadly distributed and has called for companies to lift wages by 3% or more to boost consumer spending. A draft tax plan on Wednesday showed the government may deny tax breaks to companies that don't hike wages and increase deductions for those that do.

However, the Reuters Corporate Survey - which was conducted before details of the tax plan emerged - showed companies may resist pressure to raise wages, given uncertainty over the pandemic, rising global commodity prices and a weaker yen.

A total of 54% of companies expect to keep total employee wages including bonuses flat next fiscal year, while 4% plan to cut them. Some 42% expect to increase wages.

In contrast, 50% of firms see profits increasing.

"We want the government to support companies hit hard by the fallout from COVID-19 until they recover strength to raise pay," a manager of a service sector firm wrote in the survey on condition of anonymity.

In a glimmer of hope for productivity, the survey showed three quarters of firms would spend profits on capital spending, followed by research and development.

Only 22% picked wage hikes as an option.

The Corporate Survey canvassed some 500 Japanese large and midsize non-financial corporations during the Nov. 24-Dec. 3 survey period. Around 240 firms responded to the survey.

'LOST DECADES'

The results are also notable because last month's corporate survey showed a slim majority of firms plan to or have already passed on higher costs to customers, suggesting prices could rise before wages.

OECD data shows Japanese employees' wages have hardly grown over the past 30 years, during which Japan suffered "lost decades" of stagnant growth and grinding deflation.

The average annual wage in Japan was $38,500 in 2020, below the OECD average of $49,200 and most G7 countries.

Since taking office in October, Kishida has piled pressure on Japanese firms to raise wages, urging those whose profits have returned to pre-pandemic levels to raise pay by 3% or more.

When asked to give a specific breakdown on the amount of a planned hike or cut, only 9% said they would raise total workers' wages including bonuses by 3% or more in the next fiscal year.

In a Reuters survey conducted in February, 45% of companies expected to keep total wages steady this fiscal year, 35% said they would raise them and 21% said they would cut.

"There's no future for this country unless the whole Japan heads to raise wages," wrote a manager at an industrial rubber manufacturer. "Curbing wages have left behind problems such as a declining birth rate."

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

Related Articles

Take Five: Everything to play for
Take Five: Everything to play for By Reuters - Nov 25, 2022 2

LONDON (Reuters) - The final month of the year is almost here but there's no time yet to slow down, with latest U.S. jobs numbers and euro zone inflation data coming up. And don't...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email