January 28, 2014 1:37 am JST

Companies should keep government at arm's length

KUNIO SAIJO, senior Nikkei staff writer

TOKYO -- On a trip to the U.S. in November, a senior Nippon Steel & Sumitomo Metal Corp. executive faced pointed questions from investors.

     Why is Prime Minister Shinzo Abe telling the corporate sector to raise wages? Do companies have to listen to the government? Concerned investors wanted to know.

     Their worries are warranted. Paying more for workers means less money left for distribution to shareholders in the short term.

     So Executive Vice President Katsuhiko Ota was left to repeat his mantra: Wages are determined by management and labor, and the government cannot force companies to do anything. But he is not sure whether they were convinced.

     The distance between the government and industry narrowed greatly after the pro-business Abe took the helm at the end of 2012. While the Democratic Party of Japan-led previous government was largely seen as hostile to businesses, the Abe cabinet has been willing to heed the pleas of the corporate sector regarding trade liberalization and taxation.

     A helping hand from government at times could give Japanese businesses an edge in international competition. But excessive intervention is not welcome, as evidenced by the grumbling being heard in response to Abe's repeated calls for higher wages.

     Hiking wages across the board is key to lifting Japan out of deflation. Business leaders, who have been reluctant to take the lead, may need a nudge in the back.

     The Keidanren lobby and others in the business community are leaning toward increasing base pay -- perhaps proof that the government pressure is necessary. But it should be noted that verbal intervention by the government is an extraordinary measure that runs counter to market principles.

     The government is also making a big splash in corporate reorganizations. Under legislation designed to boost industry competitiveness that took effect this month, it can investigate and publicly name industries plagued with excess capacity.

     The government denies that it is strong-arming industries into pursuing reorganization, with a senior Ministry of Economy, Trade and Industry official stressing that "Japan is not a socialist country."

     But in the power and energy industry, the government may in fact be blazing a path for realignment, with the effectively nationalized Tokyo Electric Power Co. at the core of the effort.

     Tepco's new rehabilitation plan approved this month plays up the importance of "comprehensive alliances." Unable to rebuild on its own, the beleaguered utility says it will select partners in fiscal 2014 for joint procurement of natural gas and investment in overhauling aging fossil-fuel-fired plants.

     Industry insiders believe that the government is trying to foster cooperation between power and gas companies, using Tepco as a catalyst for industry reorganization.

     Tepco, which has buckled under the weight of the massive Fukushima disaster cleanup, may give fodder to the argument that intervention is necessary because the private sector can be slipshod.

     But needless to say, business chiefs should be mindful of the stigma and shame that comes with turning to government for instructions and financial assistance.