TOKYO (Reuters) - Major Japanese firms plan to return their excess cash to shareholders next year rather than spend it on wage rises, according to a Reuters survey, in a rebuke to Prime Minister Shinzo Abe's call for employers to lift salaries.
Arresting an 17-month slide in real wages is essential if Abe's economic stimulus policies are to succeed in boosting consumption and dragging the world's third-biggest economy decisively out of decades of deflation and stagnant growth.
However, barely one in 10 firms plan to raise wages in 2015, according to the survey of 47 firms. More than 70 per cent said they would spend cash reserves on dividends and share buybacks, with most of these also putting investment ahead of wage rises.
Despite surging profits and cash balances, brought about by Abe's massive monetary and fiscal stimulus, employers baulk at raising wages, partly because they are unsure of their ability to pass these extra costs onto consumers through higher prices. "Abenomics" has pushed the yen down to seven-and-a-half-year lows, giving an outsized boost to major exporters.
Non-financial firms held a record 233 trillion yen (S$2.56 trillion) in cash and deposits at end-September, up 12 per cent from when Abe took office two years ago and accounting for about a quarter of their assets, according to central bank data.
Abe is pressuring firms to return more of this windfall to employees through higher base pay in order to boost consumption and promote a durable recovery. Within days of his re-election victory this month, he secured a pledge by Japanese business leaders to do their "utmost" to raise wages.
But the Reuters survey, conducted in the week of Dec. 15, suggests blue-chip companies are not ready to raise salaries, not even to keep pace with Japan's meagre inflation. Smaller firms, which employ the vast majority of Japanese workers, typically lag their larger peers in boosting compensation.
Real wages fell for the 17th straight month in November while wage earners' total cash earnings fell for the first time in nine months, official data showed on Friday.
Abe's long-term economic structural reforms "won't succeed unless companies show their willingness to cooperate" and raise wages, Finance Minister Taro Aso told reporters on Wednesday.
Only six companies in the survey, including convenience store owner Seven & i Holdings Co Ltd and Mitsubishi Chemical Holdings Corp, said they would boost pay next year.
Companies such as Daikin Industries Ltd and Fujitsu Ltd said they would use cash reserves to focus on keeping a balance between shareholders' needs and capital expenditure. "We're aiming to achieve further growth by enhancing aggressive investment and shareholder returns," said Daikin chief executive Masanori Togawa.
Japanese firms have long been criticised for paying poor returns on equity, which average around 5 per cent compared with above 15 in the United States.