Japan Inc shun blanket wage hikes amid coronavirus pain: Reuters poll

TOKYO (Reuters) – Nearly three quarters of Japanese firms have no plan to offer blanket base pay hikes at this year’s “shunto” labour talks, with two thirds keeping wages flat or cutting them as the coronavirus pandemic hits earnings hard, a Reuters poll found.

In a sign labour costs are straining profits, three in five firms will keep the number of employees flat in the coming financial year, while a quarter intend to raise the head counts and 17% plans to cut them, the Corporate Survey showed.

Many firms in the Feb. 2-12 poll dismissed uniform base pay hikes as out of the question due to slumping profits and future uncertainty amid the pandemic. And those who abide by pay rises will do so to retain young and skilled workers.

“We won’t raise base pay so that we can avoid increasing cost factors at a time when we cannot even foresee the future,” a manager of a steel maker wrote in the survey.

A paper and pulp maker manager wrote: “We’ll carry it out to secure new employees and keep young workers from changing jobs.”

The prospects for tough labour negotiations will likely prompt labour unions to prioritise job security over wage hikes, weakening momentum towards boosting private consumption that makes up more than half of the economy.

The Corporate Survey, conducted for Reuters by Nikkei Research, canvassed 482 large and medium non-financial Japanese corporations on condition of anonymity because they can express opinions more freely. Managers from roughly 220 firms responded.

Government data out last week showed wages fell 1.2% in 2020, with overtime pay tumbling 12%, as a state of coronavirus emergency and curbs on economic activity forced bars and restaurants to shut or cut hours to prevent the virus spread.

Japan’s biggest business lobby Keidanren has shrugged off labour demand for blanket pay rises as “unrealistic” for the pandemic-hit companies, while labour groups led by Rengo, an umbrella union confederation, have called for uniform base pay hikes of 2%.

Major firms offered pay hikes of 2% or more each spring for seven straight years through last year as the government pressured businesses to boost pay to defeat the deflation that has dogged Japan for two decades.

However, the coronavirus-impact may have changed all that.

Japanese firms have recently begun to take a more varied approach on remuneration, with more and more companies shifting to merit-based wages rather than seniority-oriented pay so as to lure young, skilled workers.

The ongoing shift marks structural changes in Japan’s labour market, with about 40% of workers being lower-paid part-time staff and contract workers – double the proportion seen in 1990.

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