Japan Post Rejects Pay Increase Request Amid Negative Rates

  • Decision affects 224,000 workers at postal and financial group
  • Sub-zero rates may erode interest income at bank and insurer

Japan Post Holdings Co., one of the nation’s biggest employers, rejected its workers’ request to raise salaries, citing the central bank’s negative interest-rate policy.

Base pay for Japan Post’s 224,000 employees will remain unchanged in the year starting April 1, Toshitaka Shima, head of human resources at the newly listed postal and financial services giant, said at a briefing in Tokyo late Thursday. Its labor unions had been demanding pay increases ranging from 6,000 yen ($54) a month to 20,000 yen.

The decision undermines the government’s goal of defeating deflation and reviving the economy through a virtuous cycle of wage and price growth, which the Bank of Japan’s recently introduced negative-rate policy is intended to contribute to. Japan Post’s banking and insurance units rely on interest income from government bonds to generate investment returns and profit, and yields on most of the securities are now below zero.

Shima said the company told the unions that negative rates could possibly have a “large impact” on the two financial units. Japan Post raised pay by 1,000 yen a month in each of the past two fiscal years.

IPO Bonus

The group will pay a one-time bonus of 8,000 yen this summer in appreciation of workers’ efforts toward last November’s initial public offering, Shima said. The $12 billion, three-pronged IPO was the nation’s biggest privatization deal this century.

Shares of the three companies have lost steam since they surged in the days following the listing. Japan Post Holdings has dropped 21 percent this year, the bank has slid 20 percent and the insurer is down 16 percent. The stocks fell in Tokyo on Friday morning.

Wage gains are slowing at other major employers in Japan. Following annual spring labor negotiations, Toyota Motor Corp., Panasonic Corp. and Hitachi Ltd. all said this week that they plan to give their workers more modest pay rises this year than in 2015.

Japan Post named Masatsugu Nagato as president of the holding company this week. Nagato, who is currently chief of the banking unit and is a former chairman of Citibank Japan Ltd., said Wednesday that negative rates are having no bigger impact on Japan Post Bank Co. than its competitors and the company is able to withstand the policy.

Nagato, 67, will next month replace Taizo Nishimuro, 80, who was hospitalized in February because of an undisclosed condition. As well as low interest rates, Nagato will have to address other challenges to profitability such as declining mail volumes amid a shrinking population. Japan Post forecasts group profit will fall 23 percent to 370 billion yen in the year ending March.

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