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Economy

Corporate chiefs cautious about across-the-board raises

TOKYO -- While Japanese corporations seem willing to heed government wishes and offer salary increases again this spring, many are hesitant to expand their entire pay scale through base pay hikes as they did the last two years.

     "We will consider raising annual salaries by about 3%," Suntory Holdings President Takeshi Niinami said. "It depends on negotiations with labor unions, but we will consider raising base pay."

     Mitsubishi Estate chief Hirotaka Sugiyama also sounded receptive to base pay raises. Real estate developers have been eager to boost capital investment amid increased demand related to the 2020 Tokyo Olympics.

     Eager to secure economic growth and win the battle against deflation, Prime Minister Shinzo Abe has called on corporate Japan to hike wages for the third straight year. Private-sector members of the government's Council on Economic and Fiscal Policy say a roughly 3% annual raise is necessary to achieve the government's 600 trillion yen ($4.99 trillion) gross domestic product target by 2020. But the corporate sector is less enthusiastic about a base pay hike this year.

     Refiner JX Holdings, smarting from dropping crude oil prices, is unlikely to consider such raises. "We're in a very difficult situation," Chairman Yasushi Kimura said. "We cannot talk about such generous offers."

     The president of electronics maker NEC, Nobuhiro Endo, said: "We will raise annual salaries to match GDP growth, but we have to be careful about raising base wages. It could become a drag on our business operations."

     In addition to China's economic slowdown, continued turmoil in the Middle East has companies playing it safe.

     "The domestic economy is expected to recover gradually in 2016, but we're concerned about Brazil and other emerging economies," said Masahiro Okafuji, president of trading house Itochu.

     Consumption trends and investment patterns are both still being swayed by a deflationary mindset, according to Akio Mimura, chairman of the Japan Chamber of Commerce and Industry.

     "Wage hikes will be a large driving force in boosting consumption," Sadayuki Sakakibara, head of the Japan Business Federation, told reporters Tuesday. But the head of Japan's top business lobby stressed that the business community will meet government requests for raises on an annual basis, including through higher bonuses, rather than adopt a higher pay scale that will affect personnel expenses for the long term.

     Some, like Dai-ichi Life Insurance, are raising starting salaries for marketing staff to attract talent. But most companies are limiting wage increases to positions with high turnover rates, with full-time employees seeing little benefits.

     A higher base pay for full-time employees often results in higher winter and summer bonuses, as well as higher benefit-related spending for companies. It can cost 1.6 to 1.7 times as much as the actual increase in salaries to implement.

(Nikkei)

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