Japan's big manufacturers signal tentative willingness on wage hikes

Reuters

By Yoko Kubota and Maki Shiraki

TOKYO, Oct 30 (Reuters) - Japan's big manufacturers, underpressure from Prime Minister Shinzo Abe to boost wages andcreate a "virtuous cycle" of growth to defeat deflation, areshowing signs they are willing to raise workers' pay.

Abe's reflationary policies to stimulate spending andinvestment have boosted the fortunes of many corporations inJapan, which is now the fastest growing of the G7 rich nations.

Mitsubishi Motors Corp, a second-tier automaker andkey player in the Mitsubishi group of companies, sounded upbeatabout the prospects for salary increases for its workers as itcompletes a decade-long recovery from deep losses.

"Up to now, everywhere in Japan we've done nothing butpersevere and do without," the automaker's president OsamuMasuko told an earnings briefing this week. "It's really too badfor people these days. If we could do this for them, it would begreat."

Masuko also said the company aims to resume dividendpayments for the first time in more than a decade, while sourcesfamiliar with the matter say it is preparing to raise about $2billion from a share issue to pay back a 2004 bailout.

Prime Minister Abe has recently been pressing big companiessuch as Toyota Motor Corp to go beyond one-off bonusesand increase base pay to help create a self-sustaining cycle ofgrowth that could help pull Japan out of 15 years of deflation.

But wariness about the durability of growth and aboutweakness overseas has left some big companies reluctant to boostwages.

The latest Labour Ministry data showed that regular pay,which excludes overtime and bonuses, declined for a 15th monthin a row in August by 0.4 percent, to 241,131 yen ($2,500). September data is due for release on Thursday.

"We will only consider base pay increases after we have seenresults for the full financial year (to March)," said HitachiLtd Executive Vice President Toyoaki Nakamura told anearnings briefing on Tuesday.

"The first half exceeded our expectations but with doubtsover the U.S. and China, we can't say anything with certaintyregarding wage increases."

The electronics conglomerate, which makes goods from nuclearreactors to washing machines, is Japan's largest manufacturingemployer with more than 200,000 workers.

BONUSES VS BASE PAY

The comments seemed to be a step back from remarks less thantwo weeks earlier by Hitachi Chairman Takashi Kawamura, whocreated a stir as he came out of a meeting of business, labourand government leaders and suggested that his company would beopen to the possibility of raising base salaries.

Toyota president Akio Toyoda also told that meeting that hewould consider returning higher profits in the form of pay.

Up to that point corporate leaders had been circumspect,willing to boost one-off bonus payments but wary of beingsaddled with higher fixed costs from a base pay rise -especially after many spent the last decade or more paringlabour costs through often painful bouts of restructuring.

One inducement for companies to raise wages was a proposalthis month for an early end to a corporate levy that has fundedrebuilding after the 2011 earthquake and tsunami, while Abe hascalled for examining a permanent cut in the corporate tax rate.

But a recent Reuters corporate survey found that only 5percent of respondents would use the additional savings to raisewages.

For years Japanese firms have been hoarding cash, instead ofspending on plants and equipment or raising salaries, due inpart to the view that Japan would remain mired in deflation. Asa result, corporate Japan is sitting on a cash pile of some 220trillion yen, Bank of Japan data shows.

Nippon Steel & Sumitomo Metal Corp, the world'ssecond-biggest steelmaker, said on Wednesday it would set aside5 billion yen to increase staff bonuses next year as itsbusiness prospects improve.

Executive Vice President Katsuhiko Ota said average bonusesnext year would rise between 20 and 30 percent from this year,as the company expects profit to rise.

But Ota declined to comment when asked whether base salarieswould be increased, saying unions have not made a formal requeston wage hikes.

Nippon Steel President Hiroshi Tomono, who also serves aschairman of the Japan Iron and Steel Federation, said on Monday:"We have adopted a scheme in which earnings are reflected inbonuses. That's the basic way of rewarding employees."

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