Faced with global downturn fears, Japan Inc avoids raising bonuses: poll

By Tetsushi Kajimoto

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 to reduce.

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 bonus system.

“We kept summer bonuses unchanged from last year, since we could not expand sales due to labor 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% target.

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 labor 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 labor shortages, boost domestic demand and raise labor 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 rationalization through large-scale wage increases.”

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.

© (c) Copyright Thomson Reuters 2019.

©2019 GPlusMedia Inc.

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The greedy corporates make up these kinds of excuses every year. They cry that the outlook is "uncertain" thus cant give raises, and then later rake in record-high profits...but still refuse to give decent raises.

We kept summer bonuses unchanged from last year, since we could not expand sales due to labor shortages

I hope the person who said this realizes the absurd irony of that statement. Employers can fix worker shortages by offering higher pay. Then their sales expand, because workers have more money in their pockets to spend on such things as... their products or services. Duh!

7 ( +9 / -2 )

We kept summer bonuses unchanged from last year, since we could not expand sales due to labor shortages,

Sure Jan!!!

And the regime is STILL raising taxes in a few weeks SMDH!!!

7 ( +7 / -0 )

This Japanese company worker says "Whats a bonus?".

7 ( +7 / -0 )

No bonus, ok never in 20 years had one, but a pay rise now that would be good. Over 0.02% would be good. Over 2% would be betters so to nullify the tax rise that's coming. Politicians yearly get a pay rise yet my pay yearly shrinks and my taxes go up not sure who is working for who's benifit here certainly no one is working for my benifit.

3 ( +3 / -0 )

Three-fourths of Japanese companies aren’t raising annual bonuses this summer, a Reuters poll found

The article is grossly strange, most companies and the government pay bonuses in June and July.

Why does it sound as if bonuses are yet to be paid and it is not yet summer when autumn is around the corner.

2 ( +2 / -0 )

The article is ...old!

1 ( +1 / -0 )

Interesting. Let’s see the logic once the tax increase comes about. If it’s not one thing it’s another. Fat cat owners get richer.

0 ( +0 / -0 )

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