April 28, 2014 7:00 pm JST

Annual bonuses to rise 7.6% in 2014: Nikkei survey

TOKYO -- Major Japanese companies plan to increase their annual bonus payments by an average of 7.69% in 2014 from a year earlier, the highest gain since 2004, amid strong earnings recovery by the weaker yen and the government's push for wage increase, a recent survey on salary trends has found.

     The amount of average annual bonus before tax will top 1.7 million yen ($16,485) for the first time in six years, coming close to the peak of 1.75 million yen recorded before the 2008 global financial crisis.

     Nikkei and Nikkei Research conducted the joint survey covering a total of 1,855 listed and non-listed major firms. The primary results are based on the responses collected as of April 14, but include some latest data. About 350 companies have responded.

     The average annual bonus dropped by 16.86% year-on-year in 2009, a year after the collapse of the U.S. investment bank Lehman Brothers Holdings. It had not rebounded considerably since then.

     As people often spend a large portion of their bonuses to buy consumer durables and pay for leisure activities and other things, a sharp increase in annual bonus levels is expected to push up consumer spending.

     In the manufacturing sector, the average annual bonus payment will rise 9.37% on the year, led by strong gains of 10.82% in the auto and autoparts sectors. Car makers and autoparts manufacturers have seen strong earnings growth.

     By company, Kobe Steel has reported a 51.68% increase on the year in its annual bonus payment for 2014, the highest among the respondents. As recovering steel demand is giving a huge boost to the company's bottom line, it will pass such gains on to its employees.

     In fiscal 2013, Kobe Steel slashed annual bonuses for its employees, down nearly 14% from a year earlier, due to its faltering business performance, but it has achieved a V-shaped recovery in its annual bonus in just one year.

     Shindengen Electric Mfg., which reported the second-largest growth in its annual bonus payment, has been seeing robust sales of its power conditioners for photovoltaic arrays due to a sharp rise in solar power panel installations following the launch of a feed-in tariff system in July 2012. With its operating profit projected to increase three-fold, the company will reflect such a gain in employees' annual bonuses.

     NGK Insulators, Mazda Motor and Yamaha -- the three firms that reported the third-, fourth- and fifth-largest increases in annual bonus payments -- expect sharp rises in their net profits in the year through March. In this year's annual spring wage negotiations, these firms have fully met the requests for an annual bonus hike by their labor unions.

     By amount, Toyota Motor tops the list with an annual bonus payment of 2.44 million yen on average, up 19.02% from a year earlier. The company also reported a 8.2% increase on the year in annual compensations -- salary and bonus combined -- thanks to its strong earnings. "In order to reciprocate greater productivity of our union members and help boost personal spending, we have made this decision," said a Toyota official.

     When it came to annual wage negotiations this spring, about 70% of companies surveyed cited the government's call for a pay raise as the biggest external factor. While 62.0% of the respondents said the sales tax hike, 50.8% cited foreign exchange moves. This shows that the government's call has had a significant bearing on companies' decisions to raise overall salary levels and annual bonuses.

(Nikkei)