TOKYO (Reuters) - Fewer than one in five Japanese companies plan to raise base wages in the coming business year, a Reuters survey shows, a stark sign that Prime Minister Shinzo Abe’s stimulus policies are still struggling to gain traction.
Some big names, like Toyota Motor Corp (7203.T), are expected to raise base pay, but the bulk of companies in the Reuters Corporate Survey say they will at most raise bonuses, which can easily be reversed if the economic recovery lapses.
While bonuses account for an average 17 percent of a Japanese worker’s total compensation, the survey points to diminished purchasing power for many workers.
Only 11 percent of firms said they plan to lift overall remuneration - bonuses plus any rise in base pay - by enough to cover a 3 percentage point rise in the national sales tax that takes effect April 1.
Abenomics has spurred economic growth and sharp climbs in corporate profits with bold monetary easing and government spending, but economists argue that base pay hikes, along with more capital spending, are key to transitioning to a self-sustaining recovery.
Since taking office in December 2012, Abe has publicly pressured big business to raise wages. Workers at major companies like Toyota, Hitachi Ltd (6501.T), Nippon Steel & Sumitomo Metal Corp (5401.T) are demanding higher base pay for the year from April.
Toyota is likely to raise base pay for the first time in six years, according to suppliers for the carmaker. Toyota officials told reporters on Wednesday that nothing was decided as negotiations are still underway.
But the survey, conducted Feb 3-17 for Reuters by Nikkei Research, indicates such largesse remains the exception as executives across a broad range of industries said they remain leery of raising fixed costs amid an uncertain economic outlook.
“If we went ahead with a fixed increase in wages, we would not be able to respond to fluctuations in business conditions,” wrote one executive at a wholesaler in a typical response.
Of the 241 firms that replied to a question on their stance on salary negotiations, 66 percent said they would lift bonuses but not underlying compensation, while 16 percent plan no increases at all. That represents a slightly more encouraging stance than in September when 60 percent described their basic stance as to lift bonuses but not base wages, while 24 percent were not considering any pay increases.
Shintaro Okuno, a partner at consultants Bain & Co Japan, who reviewed the results of the survey, said Japanese firms, having developed a lean cost structure to cope when the yen was high, were loathe to give that flexibility up.
“One of the few management (tactics) to counter instability of the future is to keep your fixed costs as lean as possible,” he said.
The results come just as worries mount that the Abenomics boost is fading. Japan’s economy, after leading the Group of Seven powers in the first half of 2013, skidded to annual growth of 1 percent in the second half, hurt by weakness in exports, private consumption and capital spending.
Sentiment at Japanese manufacturers slipped in February for the first time in five months and is seen sliding further, the Reuters Tankan survey, taken alongside the corporate survey, showed.
Concerns mentioned by executives in the comment sections of the corporate survey, included the impact of the sales tax hike on consumer sentiment, increased competition as well as rises in energy costs.
The poll also showed deep-seated skepticism that the Bank of Japan can meet its goal of lifting the world’s third-biggest economy out of 15 years of deflation by next year.
Given the headwinds, just 15 percent of respondents think prices will increase by 2 percent or more in a year from now, after stripping out the effect of the sales tax hike. Including the tax increase, however, 69 percent expect inflation to meet or beat the target.
The Reuters Corporate Survey polls upper management at 400 companies each capitalized at more than 1 billion yen. The firms, split evenly between manufacturers and non-manufacturers, respond anonymously.
Additional reporting by Tetsushi Kajimoto; Editing by William Mallard and Edwina Gibbs