Exclusive: Tight-fisted Japan firms deal blow to Abe's revival plan

[No Elephants]

Exclusive: Tight-fisted Japan firms deal blow to Abe's revival plan - Reuters survey
By Stanley White and James Topham

TOKYO | Tue Feb 19, 2013 10:34pm EST

(Reuters) - Tight-fisted companies in Japan may prove the biggest obstacle in Prime Minister Shinzo Abe's plan to push the sluggish economy into higher gear as they intend to keep a firm lid on wage levels, a Reuters survey shows.

Abe has directly appealed to Japan's biggest business lobbies to raise salaries and break more than two decades of falling average wage levels, aware of how critical rising incomes are if Japan is finally to emerge from years of deflation.

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About 85 percent of firms responding to a monthly Reuters Corporate Survey said they would maintain wage levels or cut them in the fiscal year starting in April.

Abe's gambit is that once a deflationary cycle of price declines that depress sales, business investment and incomes is broken, a virtuous cycle will kick in: investment will rise, leading to more, better paid jobs and greater demand.


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"Companies could raise bonuses, but this won't lead to sustainable gains as long as base pay remains unchanged," said Yusuke Ichikawa, economist at Mizuho Research Institute.

"If people expect prices to rise but don't expect their wages to rise, then monetary policy would become ineffective."

Abe led his party to election victory in December with pledges to end nearly 20 years of deflation and aims to use the change in BOJ leadership to shift the central bank toward the aggressive expansion of its balance sheet that he favors.

FALLING WAGES

Japan's average wages, which are closely correlated with consumer prices, have been declining since 1998, data from the National Tax Agency show.

http://www.reuters.com/article/2013/02/20/us-japan-economy-wages-idUSBRE91J03Y20130220

This all sounds very familiar, except the bit about wages and prices moving (or not) roughly in tandem.

[rpannier]

1. Dangerous Game the Businesses are Playing

One of the greatest contributors to stagnant wages in Japan was the temporary worker law extension in 1998. Prior to that companies had a year to decide whether or not to keep someone or cut them. If they kept them, they became full-time workers with full benefits and difficult to get rid of them without due process. After 1998 it was two years and they could opt for a third year as a temporary worker.

Abe and his party could opt to return to pre-1998 policies which would leave businesses in a weaker position than what Abe is offering. Before people assume he won't, Abe is an ass and if you cross him, he has a vengence streak a mile wide and a thousand miles long. This could, in the end, be a good thing for Japanese workers

[No Elephants]

2. You know a lot more about the international scene than I do.

I had no idea what his personality might be like. I don't know squat about Japanese law, either.

Bought some shares in Japanese mututal fund a few years ago. That is about it. Not big money, though.