TOKYO • Japanese blue-chip firms yesterday announced wage hikes far below last year's increases, a blow to Abenomics stimulus policy at a time fears of a deepening global slowdown and jittery markets are denting business sentiment.
Bellwether Toyota Motor Corp and some other leading manufacturers agreed to raise base pay for a third year in a row, under public pressure from Prime Minister Shinzo Abe.
Toyota agreed to a monthly base wage rise of 1,500 yen (S$18.25), half of the union's demand and far below the 4,000 yen increase given a year ago. Other carmakers also offered smaller hikes.
A Toyota official quoted company president Akio Toyoda as saying about the smaller increases that "the tide has changed over the business environment".
Unions had tempered their demands, reflecting the tougher environment. Still, companies' response at the key annual "shunto" wage negotiations was well short of the demands.
With the economy close to another recession due to weak consumer spending, Mr Abe has been counting on wage hikes to drive a virtuous growth cycle led by higher incomes and increased consumer spending and business investment.
"Many companies are making record profits, so I expect wage hikes will be realised firmly," Chief Cabinet Secretary Yoshihide Suga told reporters yesterday.
Analysts found the increments "disappointing". "A ripple effect from wage hikes at major firms will be limited on small firms and contract workers despite labour shortages," said Japan Research Institute chief economist Hisashi Yamada. "This won't boost the economy."
Electric machinery makers such as Hitachi, Mitsubishi Electric and Panasonic Corp halved this year's base pay rise to 1,500 yen.
The monetary "arrow" of Abenomics was meant to raise inflation expectations to 2 per cent and provide a mechanism to coordinate wage and price inflation, two International Monetary Fund (IMF) officials wrote on Sunday.
"This has proven to be a hard struggle because companies and workers alike seem to look backward rather than forward in setting their expectations," said an article co-authored by IMF Japan mission chief Luc Everaert.
The article came against the backdrop of growing frustration in government against Japan Inc's resistance to significantly boost wages. "It's about time for overseas people to pile pressure on those Japanese companies that won't raise wages rightly," one senior official told Reuters.
In 2014, leading companies consented to an average wage hike of 2.19 per cent and last year brought a 2.38 per cent raise - a 17-year high.
With the momentum for higher wages waning, analysts expect pay rises to slow to just above 2 per cent at this year's shunto.