Reuters: Japan Inc. Less Than Normal Wage Increases:

https://www.yahoo.com/finance/news/japan-inc-tightens-wage-purse-051758370.html

Article:

TOKYO, March 11 (Reuters) - Against the backdrop of the coronavirus epidemic and a looming global economic slowdown, big Japanese carmakers and electronics firms are tightening their belts in influential annual wage deals being hammered out with unions.

Setting the tone, Toyota Motor Corp said on Wednesday it had agreed to give workers an average monthly pay raise that's 20% lower than last year's hike. What's more, the hike reflects factors like seniority - for the first time in seven years, base pay will not rise.

The prospect of tame wage rises to shelter corporate profits will curb consumer spending and make Prime Minister Shinzo Abe's lofty goal of generating a self-sustaining growth cycle - a key plank of his 'Abenomics' policies to stimulate the world's 3rd biggest economy - even more remote.

Comments and Ideas:

Large companies such as carmakers and electronics firms, were probably already feeling the global economic slowdown, before the virus situation. The virus situation of course was an incentive to reduce wage deals to protect company profits. The 20 percent less, for example for Toyota workers, well better than nothing, but will it help workers, who are consumers feel good enough about the wage increase to turn that into some kind of consumer spending? Most likely not now, with the virus situation, except for it they decide to use some of it for online shopping.

The BOJ and the government has for years been trying to get companies to increase wages as a way to get consumers to spend more and then maybe get inflation up to the 2 percent goal that the BOJ has been trying unsuccessfully to reach. Even if the wage increase were at level that was acceptable, because of the virus situation, it might not have helped consumer spending, except of course online consumer spending.

Article:

Over the past six years, major firms raised wages more than 2% each spring as Abe heaped the pressure on businesses to boost pay to put an end to deflation and stagnation that has dogged Japan for two decades.

BOJ Governor Haruhiko Kuroda has said he would closely watch the outcome of the wage talks for a clue to gauge the price trend, as the central bank may expand monetary stimulus next week to counter the fallout from the spread of the coronavirus.

"Substantial wage increases cannot be expected in 2020 as base pay won't rise much," said Yoshiyuki Suimon, senor economist at Nomura Securities. He was referring to base pay hikes, which determine regular pay that accounts for most of monthly salary.

Comments and Ideas:

The negative interest rates, focused on big companies to "use their money or lose their money" meaning of course use their money to increase wages to the point that wage earners, who are consumers, will feel good enough about the wage increases and begin to spend or use it in the economy.

The Bank of Japan, now, even with little real ammunition available is most likely going to have to so something to help/fix/stimulate the economy in the future. The BOJ has been cautious so far on the language it has been using to talk about what it might do, but now it seems to have no choice but to me more direct in what it is going to do, instead of the usual shadow games of stealth language to make sure the markets are not upset with its language. Well the markets are upset already with a lot of things, and probably waiting to see what the BOJ is going to do, if anything substantial.

Article:

Economists expect to see more wage deals like Toyota's, with no base pay hike but an average increase of 8,600 yen ($82.15) per month more in the fiscal year starting April, compared with last year's average 10,700 yen raise.

Koya Miyamae, a senior economist at SMBC Nikko Securities said: "Companies are turning cautious about base pay hikes as the new virus outbreak will exacerbate declines in profits."

"As the virus outbreak deepens, labour unions are also losing momentum towards base pay hikes, and both manufacturers and non-manufacturers become half-hearted about wage hikes."

With the economy already teetering on the brink of a recession, however, Japanese firms have become wary about wage hikes committing them to higher fixed costs.

Comments and Ideas:

It seems labour unions see what is going on and know they probably are not going to get what they want in April. As such, they might not even try to get the same wage increases as before. It seems everyone sees what is happening and both groups, labour unions and companies understand the situation and maybe the labour unions might be thinking, whatever we can get now is all we can expect. It must be noted, hopefully, companies won't use this to shut out all wage increase, as least for large companies. Small and medium sized companies are a completely different situation as they just fighting for survival.

Article:

Companies have begun to take a varied approach, with more withholding blanket pay hikes and shifting to merit-based pay rather than seniority-oriented pay in an effort to attract young and skilled workers, while restraining wages for the middle-aged and elderly.

Wage strategies have also been affecting by diversification in Japan's work structure.

About 40% of workers are now lower-paid part-time staff and contract workers - double the proportion seen in 1990, just before the Japan's asset bubble burst, ushering in deflation.

The growing army of low-paid workers has led unions to prioritise addressing the income gap between permanent employees and others, rather than broad uniform pay raises

Comments and Ideas:

Also add in the idea that maybe Japan has a so-called labour shortage, and as such, maybe using merit pay and other incentives to attract young and skilled workers, who no longer want to wait the 10 to 20 years needed to move up the company like those before them. Its unfortunate, like many places globally today, contract and low-paid workers are becoming and more a part of the workplace. The low-paid workers maybe are the ones going to suffer the most in the virus situation now.

Have a nice day and be safe out there!

© 2020, Tom Metts, all rights reserved