Japanese firms resist Abe's calls to raise wages

So I guess we are really screwed. Rising prices, rising taxes but no pay raises.

What I big surprise! NOT! There's your third arrow folks! Right up the kaiba!

"...by James Topham"

Poor guy. Probably took a week or so to write this piece but didn't include the result if the meeting with Yonekura (Keidanren) et al and Abe yesterday.

官に取られるより企業に残る部分が多くなるので、賃金は増えると思う

"there will be more left within the companies as opposed to government taking them so the wages, I think will increase"

*And they argue, they shouldn’t be compelled to lift wages, just because the government decides to hike taxes. * “The burden of the tax rise should essentially be on the Japanese people,” said an executive at a metals and machinery maker, who is planning to keep the status quo. “We need to keep an eye on prices.” Really! Even though they themsleves are getting huge corporate tax cuts! The second comment makes me want to pull my hair out. Everybody knows that the LDP is was and will always be corporate friendly, and that they agree with this fools opinion. Let the little people pay for our grandeur. I wish people had more backbone to start to rally or protest, but they won't. they will accept it and hope to be thrown a few scraps from their overlords.

For many of the largest private sector employer in Japan, a move to raise wages could lead other employers to follow suit, in turn giving those workers more money to spend. By raising the wage, it puts more businesses on an even playing field. The increase in wages to a rise in consumer spending. Even if higher wages for its workers, it will not lead to an immediate drop in profits.

It does, however, address the "how long can it last" question of what Japan is facing. The aging population, education level of new generations, changes to mentalities will all change many things and cost more and more. If high education levels, economic growth and creativity are the main goals for Japan, things can continue. If the redistribution becomes the most important goal, the future is less sure. The changes to those values, choices, and populations will impact the future.

It's the salaried workers who get the short end of the stick.

(It's just nemawashi, Supreme Advisor!)

I think is a big mistake right now up the TAX 8% he should up to 6%. Let's hope the best for Japan.!!!

The globalization has brought a negative effect to US and Japanese labor markets as these countries have been placed in a wage sensitive position to compete among countries like China, India and Indonesia. These workers in China, India and Indonesia (example) are making 1/10th of US and Japanese wages.

Everything will be adjusted to the 'Economic Equilibrium ' a condition or state in which economic forces are balanced.

You may hate me but I would not expect too much. Just be glad you have a job.

nigelboy: ""there will be more left within the companies as opposed to government taking them so the wages, I think will increase"

If only sentiment and whimsical wish could manifest into reality. Abe can 'think' all he likes, it won't change the way things work. There will be tax increases, and none of the wage/household increases Abe promised. THAT is the true 'Abenomics'.

I hope anyone defending this guy and his actions doesn't mind doing so at a higher cost.

Simple answer is to get motivated and creative, stop putting your hand out to your boss for your salary and go create a situation where you work for yourself, be smart about it don't just sit there and moan. Make you dream come true or work for some one else and make their dream come true.

The market governs wages, not the politicians. Companies pay whatever wage workers are willing to accept for their labor. If the wage is too low workers go elsewhere. The prevailing wage is determined by a country's economic environment, and the fundamental economic environment in Japan is bad.

A company's largest annual expense is usually taxes, payroll for company employees comes next. If Abe wants companies to pay their staff more, he should find a way to pay his government staff less.

Japan has just about the largest government bureaucracy per-capita in the world. In recent years the population has begun to decline, and many companies have left Japan, but the size of government has remained the same, or, in some cases, grown even more. The shrinking economy is providing less and less revenue for the government to squander, hence ever-increasing borrowing, and tbe tesulting debt.

As long as the government consumes the majority of GDP (and contributes nothing to it), the economy will not grow. If tne economy does not grow, companies cannot hire more or pay more. They will simply move to Indonesia, Vietnam, or elsewhere.

anybody thought that companies would lift wages is a fool, so cutting the corporate tax and upping the consumption tax is basically a wage decrease. taking from the little guy and giving to the rich. you watch consumption plummet after the 8% increase. instead of giving companies a tax cut they should be giving families goods/food vouchers to increase consumption, not money as people will just save it.

sangetsu03Sep. 21, 2013 - 09:29AM JST

Enjoy reading your posts.

My firm included here.

“The burden of the tax rise should essentially be on the Japanese people,” said an executive at a metals and machinery maker, who is planning to keep the status quo. “We need to keep an eye on prices.”

And this, ladies and gentlemen, is the international trend, but it is dead wrong. Companies are legally people. The stockholders and managers enjoy many protections as a result of this, but when it comes for companies to do their civic duties, or be held accountable for wrongdoing then suddenly they're companies and only accountable to their stockholders and the bottom line.

This is the fundamental problem with the current international view of corporate governance, the idea that companies are people, but not citizens of any country and have no social responsibilities. Companies are quick to identify themselves as "American" or "Japanese" when it comes to giving holiday sales, or when it comes to asking the government for bail-out, but when it comes to doing THEIR duty they're sadly remiss.

... so let's make this simple Abe-san. Make a list of every company that doesn't give their employees a raise and put at the top of the list, "Un-Japanese Companies". The government can easily get this data from income tax records, and now it is up to companies to decide whether the value of the negative publicity offsets the cost of a wage hike.

If any wage needs raising, it is the minimum wage. 850-950 yen an hour in this country is a disgrace. With such an income, a person is unable to rent a decent place to live and buy their food, pay health care and pension payments. How is it that some other civilized countries can fund the pension scheme from the tax take ? Pension payments are just another form of tax apart from normal income tax, except if you can't keep up your payments you will lose all you have paid in and receive no pension either.

Even 10 percent consumption tax would not be bad providing income tax was reduced and all other sales and purchasing taxes were removed. Especially in the case of a new car, purchasing tax which is just the same as a consumption tax but under a different name. How about removing the 23odd yen extra so called temporary tax on fuel.

Japan claims that thier consumption tax is lowest in the world, but fail to mention all the other taxes levied on all sorts of goods an services.

Companies are legally people

Someone else shared the same view as yours and that comment derailed his Presidential election campaign since then. The view of Supply Side Economy is always interesting to read.

Mitt Romney says CORPORATION ARE PEOPLE at Iowa State Fair

http://articles.washingtonpost.com/2011-08-11/politics/35270239_1_romney-supporters-mitt-romney-private-sector-experience

I have resided in many countries and found Japan the easiest one to make money. It is so easy to set up business in Japan and if you speak another language you are sorted. I would recommend everyone to take the step away from the rat race.

falseflagsteveSep. 21, 2013 - 11:22AM JST

I have resided in many countries and found Japan the easiest one to make money. It is so easy to set up business in Japan and if you speak another language you are sorted. I would recommend everyone to take the step away from the rat race.

Agree. US market is a cut throat market unlike Japan.

@steve

Well said. If you have motivation, you can do well in Japan. I had a much harder time getting ahead back home due to excess red tape. Over here, people listen to me, at least the ones that count.

Just got a nice pay raise and promotion. Become a multi-capable person - constantly increase your skills - your "luck" will change.

I wonder what kind of a dream world Abe is living in.

Does he imagine that companies can increase salaries just like that, without increasing sales?

Of course they are going to ignore him.

I wish the rest of us could.

But unfortunately what this idiot is doing is going to impact very, very heavily on our lives.

Let me get this straight:

Tax increase for everyone. Tax reduction for companies. No salary increases expected.

How is this going to help anything?

No raise in pay mean less money to live on after the tax hike. This means less spending by the common person! But wait there is more! The government just announced tax cuts for big businesses so the revenue from those taxes are now gone!

So, the government hopes to raise the sales tax to 8% thus causing the common shopper to have less money. Then Abe administration asks these companies to raise salaries so employes can have more to spend. While at the same time cutting corporate taxes.

So raise the sales tax to help balance the deficit. This doesn't work because companies will not give its employees a raise so they can spend more money. Because the companies want to save money themselves because they are uncertain about Japanese economy in spite of the Japanese governments promises to get them corporate tax cuts.

Bottom line is it's a farce it won't work! Economic stimulation never works when you raise taxes!

Unlocking shareholder value must come first. I am firmly opposed to any hikes in wages.

It's the salaried workers who get the short end of the stick.

True, and those on fixed incomes (and, no, not all or even most pensioners have huge savings) aren't going to do too well, either. Worse, probably.

So if they raise the taxes, and not the pay isnt that going to screw over a lot of people? Especially the elderly, I know that over here we're having taxes issues and its hurting a lot of people still. I'm not exactly a Abe fan, it just seems like hes all over the place now :/

3kunfuuSep. 21, 2013 - 12:56PM JST Unlocking shareholder value must come first. I am firmly opposed to any hikes in wages.

Excellent!! So I thoroughly expect that directors' bonuses and senior management raises will also be cut.... what? ... oh, I thought not.

Abenomics failure was baked into the cake. The demographics of Japan mean that deflation can't be defeated. The currency may be debased, but demand will remain mired. How can wages rise in this environment? Demand from abroad will dip more from now on too.

"The burden of the tax rise should essentially be on the Japanese people".

When we consider that it's the Japanese voters of the past two decades that elected the politicians that have irresponsibly blown Japan's debt levels to such unsustainable proportions, it is hard to rationally argue with that.

The Japanese people had the power to vote for other policies... but they didn't. Now Japan's government has so much debt that it has to borrow more money just to pay back the interest on the debt that it has already racked up. If the Japanese people who voted for the politicians who did this aren't the ones to start paying back this debt, who is? Santa Claus doesn't exist and the Japanese know it.

I see "corporations" getting a hard time here. Look, corporations are good. It's corporations that enable the efficient production of various things of value to others, employ people and thus pay them wages. But corporations can only thrive in a competitive business environment. When business thrives the labour market improves, and this is what leads to sustainable upwards pressure on wages. Common sense dictates that any government worth its salt should enact policies that improve conditions for these employment generating machines, not policies that make or keep them uncompetitive.

Look, what is stopping anyone with the means to access the Internet from doing something to personally benefit from all this? Whether we think Abenomics is going to succeed or not, either way it has created and will create further opportunities for those who look at the reality and act upon the cards that have been / are dealt. If you are so certain corporations are going benefit from corporate tax cuts, then why not get some exposure to that yourself? Instead of pointlessly complaining about the corporations benefiting, why not take your own stake in them? Invest in a mutual fund or some other kind of investment vehicle that will benefit. From 2014 there is a NISA scheme coming along that will make it possible to put a little bit of cash into investments and pay no tax on the profits.

Abe no mix?? My guess his mix of economics is in need of a it of down to earth with a bit of reality!!

The greedy "firm owners" want the tax cut to buy themselves one extra porsche per year. They are really laughing in our face. So, just hit them with double tax, and give it to the workers, easy. But if the j-gov does that, it'll keep the tax for themselves (more bureaucracy, no change, keep life-long gov jobs).

@StormR... not everyone is an entrepreneur, full of self confidence and the necessary get-up-and-go. Some people, myself included, work to pay bills and to feed myself, and to have that holiday... they don't want to risk everything on a new idea that could lead them to poverty. It's a nice idea, but we're not all blessed with the same motivation as you appear to be.

When we consider that it's the Japanese voters of the past two decades that elected the politicians that have irresponsibly blown Japan's debt levels to such unsustainable proportions, it is hard to rationally argue with that.

To be fair, they've been fed with the idea that this is OK. Certainly, this is not a mistake unique to the Japanese people.

Besides, like most democracies, Japanese people get to choose only package deals offered by each party. That's the problem with representative democracy as the reps get formed into parties.

I have to wonder whether it is time to go back to direct democracy, which AFAIK was the original democracy when first made in what was it, Greece?

... so let's make this simple Abe-san. Make a list of every company that doesn't give their employees a raise and put at the top of the list, "Un-Japanese Companies". The government can easily get this data from income tax records, and now it is up to companies to decide whether the value of the negative publicity offsets the cost of a wage hike.

I doubt this would stop them. I think realism dictates some real incentives will be required. Instead of lowering taxes, why not offer subsidies. Even make the amount the same as the estimated delta in the current tax cut. Companies qualify for a proportionate cut of the subsidy by proving they've given their employees real raises. No raise, no subsidy.

Mark my words, real income will fall over the next five years, with purchasing power being outpaced by the cost of living. Sadly, there are no easy answers for Japan and there is much pain on the way.

Certainly, this is not a mistake unique to the Japanese people.

Unfortunately it is. They have continuously ignored that their politicians driven by a crazy bureaucracy have been not only wasting the wealth of the country but also been taking the debt out of any rational proportions, look at the absolute value of the total public debt, the number is so big that it really rises the question if it still makes any sense. Their bureaucrats have been conducting policies targeted at the benefits of a few by spending public money in black holes and the amount of corruption that it has created particularly with the construction companies is crazy.

Besides, like most democracies,

Are you seriously thinking that Japan is a democracy? How could have a democracy possibly ended up with the same party in power for more than 50 years? If Japan would be the beginning of a democracy, it wouldn't be in this situation because precisely real democracy would have put a real debate into the Japan society but instead people in this country have been asked just to shut up and pretend to vote during elections.

gogogo

Let me get this straight: •Tax increase for everyone. •Tax reduction for companies. •No salary increases expected.

How is this going to help anything?

Start a company, use your skills for yourself, working for someone else makes them money not you.

Unfortunately, most people don't have a very firm grasp of economics, particularly in regard to taxation, and it's effects on a national economy in a global environment.

I often hear shrill screams that we should "tax the rich!", or "tax the corporations!". People naturally assume that since the rich and the large corporations have more money than others, they should pay more in taxes. What most people don't understand is that the majority of rich people in a place like America did not inherit their money, or steal it from the poor.

The majority of the rich in America are first-generation rich. To become so, they worked harder and took more risks than most people do. The vast majority of these rich are small business people, and they employ more than half the workers in America. Taxing the rich heavily will result in two things happening. First, those who are already rich will either cut their expenses (meaning staff, equipment, or growth) to compensate for the decrease in their income. Second, those who are not yet rich will find it more difficult to become so, or they may simply not bother trying. Since small business is the mainspring of the American economy, taxing the rich tends to slow economic growth, which in the end hurts everybody, and the poorest in particular.

Taxing corporations at a higher rate is pure folly. Corporations pass down the cost of increased tax to the consumers the same way they pass down costs for increased energy prices and materials. When the tax is increased to the point that a company's products become so expensive that consumers stop buying them, production is simply moved to another country where the overhead is lighter.

Whenever a politician tells you that he is going to help the poor and middle classes by taxing the rich and the corporations, what he really means is that he is going to tax you to help himself. Any tax levied on the rich or on corporations is directly transfered to the middle and poorer classes, ALWAYS! AND EVERY TIME!, This is third-grade elementary school economics, yet many highly educated people can't seem to grasp it, probably because it is too simple. Any politician who gives you the "tax the rich" line is assuming you are stupid and/or ignorant. Unfortunately, in regards to economics, the politician is making a safe bet.

Here is an example. Say the consumption tax in Japan is raised up to 10%, what will you do? If you are wise enough now to be living on a budget, you have two options. First, you must either cut your expenses by 5%; you spend a little less for food and entertainment, etc. Or, if you wish to maintain your current lifestyle, you might decide to work a little more overtime, or find some other way to make up for the shortfall. In the end, you do exactly what rich people or corporations do when their taxes are increased.

A so-called tax on the rich and/or corporations is a tax on everybody, please understand this.

If only sentiment and whimsical wish could manifest into reality. Abe can 'think' all he likes, it won't change the way things work. There will be tax increases, and none of the wage/household increases Abe promised. THAT is the true 'Abenomics'.

Smith fail again. The quotes are not from Abe but from Yonekura, the head of Keidanren.

Abenomics will fail badly not because of taxation policy but structural fundamentals.

Sell your properties and stocks on the recent huge Japan REBOUND.

Declining and rapidly aging population only means in due time property prices will decline. Foreigners buying expensive properties will be stuck. Japanese family units are getting smaller. Young Japanese adults have little savings with many holding part-time jobs with little prospects.

Fukushima nuclear contamination has been out of control, and more earthquakes, etc will make Japan even less attractive. Getting the Olympics is a one-time booster with heavy attendant costs into an out of control national debt.

Japanese companies and Japanese culture are the least suited for globalized markets and culture. Japanese exporters strengths are mainly in engineering. China, Korea, Brazil, USA, etc will clearly overrun Japan in engineering with lower costs structure. Germany, etc will continue to fight for its share. Long-term Japanese firms will be in big trouble. Current respite from weak Yen, will result in higher and higher import costs which will cancel the benefits.

Any company that wants to manufacture cheaply will move to China where a worker's salary is 1/10 that of a worker in Japan-it is a no-brainer!

Just by looking at the very high risks the country and the man on the street faces with respect to Shinzo Abe's economic policies, one can tell where his famously quoted ' Three Arrows ' are going to land even if he and Kuroda doesn't want to face facts. More fun coming your way......