Japan’s biggest banks agreed to raise salaries for the first time in 19 years as an economic recovery puts them on pace to achieve record annual profit.
The banking units of Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. will each increase base pay by 0.5 percent in the year starting April 1, in line with requests from the companies’ labor unions, bank officials said by phone today.
The banks follow manufacturers from Toyota Motor Corp. to Hitachi Ltd. in increasing pay as Prime Minister Shinzo Abe calls for companies to boost wages to help sustain the economy’s revival. Without higher incomes, Japanese households face declining spending power as the government targets 2 percent inflation and will raise the sales tax next week.
“The pay rise is ideal for Japan’s economy as it should spur consumption,” said Nana Otsuki, an analyst at Bank of America Corp.’s Merrill Lynch unit in Tokyo. “A 0.5 percent increase may look small compared with the inflation target but it probably reflects the banking industry’s revenue growth prospects.”
Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest lender, will increase bonuses by 1 percent next fiscal year, spokesman Yuji Okumura said. Sumitomo Mitsui Banking Corp., the lending arm of the second-biggest bank by market value, will boost bonuses by 5 percent, said spokesman Tomoyuki Narita. The payments at Mizuho will also rise 5 percent, spokeswoman Masako Shiono said.
Japanese banks halted salary increases in the mid-1990s, when bad loans soared and deflation began plaguing the economy after a stock and property market bubble burst. The 2008 global financial crisis further deterred lenders from raising pay as they focused on bolstering capital and restoring profits.
The three banking groups achieved 91 percent of their combined annual profit target in the first nine months of the year ending March 31 as a stock market rally fueled fee businesses and loans climbed.
Combined net income totaled 2.1 trillion yen ($20.5 billion), near their full-year goal of 2.26 trillion yen, which would be the most since the three-megabank regime started in 2005, company reports showed last month.
Shares of Mitsubishi UFJ rose 0.9 percent at the close on the Tokyo Stock Exchange, and Mizuho gained 0.7 percent. Sumitomo Mitsui fell 1.6 percent.
Japan’s consumer prices are rising as the Bank of Japan pumps cash into the economy to end more than a decade of deflation. Benchmark inflation held at 1.3 percent in January, the fastest pace since October 2008. Abe is raising the sales tax to 8 percent from 5 percent on April 1 to address a swelling public debt burden.
Based on negotiations across 43 union groups, companies agreed to increase base wages by an average of 1,950 yen a month in the coming year, the Japanese Trade Union Confederation, known as Rengo, said on March 12.
At Toyota, the average union member will get a 2,700 yen bump in monthly base pay. Hitachi is raising wages by 2,000 yen a month. Nippon Steel & Sumitomo Metal Corp., Lawson Inc. and Daiwa Securities Group Inc. also agreed to increase salaries.