While banks and securities firms are all for an overdue wage increase, most Japanese companies are still evasive over answering Prime Minister Shinzo Abe’s call for hiking up the wages. Abe believes that this is a key strategy in continuing Japan’s “escape” from decades of inflation and building on the confidence in the administration’s efforts.
Abenomics, which is what they call Abe’s policies in boosting up the economy, has positively affected stocks and real-estate prices, but now the sustainability of this strategy is being called into question. Analysts say it now hinges on the willingness of Japanese firms to spend on wages and investment. Abe told his ruling Liberal Democratic Party that companies need to increase salaries by April of this year, which is when the first round of the consumption tax increase goes into effect with a jump from 5% to 8%.
The Japanese Business Federation, the country’s most influential business group, is highly encouraging companies to also do a wage increase, but many have played coy and non-committal to the issue. The other business lobbies have also taken up the call for the wage hike. The Japan Association of Corporate Executives said it will be difficult for Japan to continue their path of growth if companies would not do so. The Japan Chamber of Commerce and Industry is a bit more cautious, with chairman Akio Mimura saying that he understands companies need to feel the effect of the economic growth first before agreeing to a wage increase.
Some firms have said it’s much too early to do so, while others say that if they increase wages now but later have to cut them down again, it would affect company morale. Takeshi Niinami, chief executive officer at Lawson Inc., says that 2014 is the deciding year for them, and if it clearly shows that Japan is indeed exiting deflation, then they will be able to increase wages the year after. Akio Toyoda, the president of Toyota Motor Corp. said they are currently in negotiations with the labor unions, but the decision for a wage increase “should be up to each company.”
[ via Wall Street Journal ]