Japan Salaries Extend Fall as Abe Urges Companies to Raise Wages

Japan’s salaries extended the longest slide since 2010, even as Prime Minister Shinzo Abe urges companies to raise workers’ wages as part of his bid to reflate the world’s third-largest economy.

Regular wages excluding overtime and bonuses fell 0.3 percent in September from a year earlier, marking a 16th straight month of decline, according to labor ministry data released today. Total cash earnings rose 0.1 percent.

The data underline the difficulties Abe faces in getting companies on board in his drive to end more than a decade of deflation among nascent signs of price gains after the Bank of Japan’s unprecedented easing. Trade unions are demanding higher base pay, and the question now is whether firms will agree in wage negotiations early next year.

“The key for the success of Abenomics is whether companies will raise wages,” Norio Miyagawa, a senior economist at Mizuho Securities Research and Consulting Co. in Tokyo, said before the report. “Companies still aren’t confident enough that growth will be sustained and will probably hesitate to raise wages, especially base salaries, for the time being.”

Wages are falling behind price gains. National consumer prices excluding fresh food rose 0.7 percent last month from a year earlier, a fourth straight increase.

Expansion Forecast

The nation’s economy is forecast to grow until April, when a sales-tax increase is likely to cause a one-quarter contraction. Domestic demand is boosting production, and a survey of purchasing managers released today showed manufacturers this month at their most confident in more than three years.

Abe said in a speech this month at the start of a special parliamentary session that he aimed to boost employment and raise wages, creating a “virtuous circle” that spurs consumption and investment. The government began holding meetings with business and union leaders in September as part of a campaign to persuade businesses to raise wages.

Kaoru Yosano, a former finance minister, said in an interview this month that wage gains hinge on a pick-up in demand, not just pleas by Abe for companies to do their part for a recovery.

Trade union negotiations with management on salaries in talks known as “shunto,” or the spring wage offensive -- around March next year -- will be key for pay increases.

Spring Offensive

The negotiations “will be one clear point at which there is a chance to either show that something new is happening or raise further doubts,” Jerry Schiff, the International Monetary Fund’s mission chief for Japan, said in an interview this week in Tokyo. “It’ll be important to get wages to begin to rise soon.”

The Japanese Trade Union Confederation, or Rengo, plans to demand pay increases of more than 1 percent in next spring’s labor talks -- a move welcomed by Economy Minister Akira Amari.

Toyota Motor Corp. President Akio Toyoda said Oct. 17 that Toyota workers need better benefits and wages, while Hiromasa Yonekura, head of the Keidanren business lobby group, said the same day that an improvement in corporate earnings will lead to an increase in capital spending and wages.

Before it's here, it's on the Bloomberg Terminal.