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

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  • 4

    Yubaru

    And the other shoe now drops.

  • 8

    sengoku38

    As long as the population is decreasing, deflation is the natural state of the economy. If Abe wanted to change that, he should have had a few million children 30 years ago.

  • 8

    umbrella

    40% of workers in Japan are on totally insecure temporary contracts. Terrible situation. Demand will not rise.

  • 5

    JeffLee

    Abenomics will make the 1% richer. And if the rest of us are good little doggies, they might decide to throw us some scraps.

    So be positive, people.

  • 11

    BertieWooster

    OK. Let's say you're a shop owner.

    Your business is not doing well.

    Your sales figures have crashed.

    Customers are going to rival shops.

    So, what are you going to do?

    Put yourself in even more debt to buy new wallpaper and to fix the creaky stairs?

    It's basically the same thing with a country.

    Abe is bankrupting this country.

    Those who have been successful in large businesses know this.

    Abe and the LDP are the worst thing that could happen to Japan at this time.

  • 3

    smithinjapan

    I've been saying this kind of thing would happen since day one of 'Abenomics'. Not even one week ago an old guy I was talking to, who was showering praises on Abe, said that the wages for the middle-class will increase under Abe and the economy flourish and that a ration of one yen to one dollar (US) would benefit the world. I said in reply that while I had no doubt taxes will increase in the future, costs are already increasing due to the increase in imports, that companies will benefit in the short term from an increase in exports and subsequently in stock prices, but that companies will not, in general, increase wages and the middle and lower-class earners will not benefit at all. This, I said, will do nothing but benefit the company heads and politicians, but hurt the nation as a whole and lead to another collapse in the future. He shook his head and even got a bit angry I would question 'Abenomics', but here is proof of pretty much what I was talking about. Japan Inc. wants to have its cake and eat it too, and while it's not directly Abe's fault he should have done more to ensure this while practically threatening to nationalize the BOJ if they didn't weaken the yen, etc.

  • -1

    GW

    Companies will be VERY reluctant to raise wages, they might up the "bonus" on ocassion, but the last 15yrs have FINALLY taught most here what the "bonus" REALLY is & thats a way for companies to cut wages without having to consult staff, something I pointed out when I first landed, nobody believed me then, most do now though!

    What J-Inc should do is tell abe they will only consider wage increases IF companies can more easily let staff go when they are found to be dead wood or in actual tough times, right now they cant & is HUGE reason why wages are stuck or in decline.

    Combine all the above & toss in the fact over 70% of companies in Japan DONT PAY ANY INCOME TAX & its blatantly obvious Japan faces massive problems.

    And abe tossing trillions into infrastructure WILL NOT WORK, like always when this is done 15-20% is wasted, stolen, misdirected, amakudaried, straight away off the top & then you get very low value for $$$$ spent.

    All of this points to another screwup!

  • -1

    edojin

    The lead-in to the story above has it wrong. It should read something like "companies that are scared they will collapse if they increase their employees pay" will prove to be the biggest obstacle to Abe's plan to ....

    The words "tight-fisted" are quite misleading, I think.

    If economically struggling companies do increase their employees' salaries, where will these companies get the money to make the increases? The companies that do have funds in reserve want to hold on to what they have in case a new recession comes roaring along. Abe and his financial cohort Aso have said they want to flood the country with money ... but even if they do, how is that money going to make it into the pockets of the average worker?

    Abenomics boggles the mind. It's something like Obama's idea to increase the minimum salary in the U.S. ... the money of which must come out of the pockets of the employers, many of which run medium and small scale operations. Again, where does Obama expect the extra money to come from?

    Already the 100-yen shop operators here in Japan say they are having problems making ends meet now that the yen's value has changed when compared to foreign currencies. Their profit is only a yen or two per item ... and now they are suddenly faced with making monetary shortfalls in their pricing systems.

    Because of weak opposition in the national parliament, it appears that Abenomics will be the only way to go as we head down yet another rocky road into the unknown. As I keep saying ... just hope Abe & Aso & company know what the heck they are doing ... and hopefully pull the right strings so as to get Japan Inc. back on track properly.

  • 4

    japan_cynic

    Um, the govt has imposed 5-10% pay cut on all its workers...I'm earning less than I was 5 years ago.

  • 1

    PT24881

    @PATRICK SMASH The majority of comments related to 'heated sujects' we came cross remained unfortunately somewhat 'overdone' in defending opinion of their respective 'camps'. Regardless of one's stance on the subject, genuinely appreciated your comments above supported pertinently by factual 'survey' story. Meanwhile, well thought structure in presenting the ideas that ended up with high 'readability'. Thanks !

  • 1

    Reckless

    “It will take a great deal of time and effort for production that once left Japan to come back,” Akio Toyoda, president of Toyota Motor Corp, told reporters last week.

    Forever is a very long time. Even if manufacturing comes back it will be higher output with less workers (i.e., higher productivity). The game is O V E R.

  • -4

    bokuwamo

    The guy, Abe is trying to do something to improve things. There is a lot that has been done before him that makes his ideas harder to get in motion. He got voted in because most of the voters thought he has the right ideas to effect a positive change to the economy, in general. Comments on how he is doing being made by foreigners points of view, is the essences of this webpage. Are the economies of your own countries doing all the terrific? Reading and hearing about the worlds largest economes, it seems as if all countries have serious problems and have yet to have the answers to their problems. Is Abe suppose to be some type of messiah and do something that a lot of other countries can't seem to do?

  • 6

    andrewfx51

    @bokuwamo Tu quoque.

    Most posters would acknowledge the economic problems in their respective countries, but directing attention towards the US or Europe doesn't make Abe's economic policies any more credible. Nor is it the topic of this article.

    Labour laws, work/life balance among other things need to be addressed in tandem with economic policy to be effective, otherwise it will be just a stop-gap measure

  • 1

    Serrano

    "Tight-fisted companies"

    That would include my company when it comes to salaries, but on the other hand they'll waste millions of yen on other stuff they don't need. Idiots.

  • 0

    globalwatcher

    Without wage rises, Japan could be left with “bad” inflation, where a weak yen pushes up import prices as household earnings stagnate. That would hurt, rather than boost, demand and growth.

    The decline in wage levels also contributed to deflation through a decline in the prices of goods and services which are labor intensive. While Japan was relatively low in unemployment compared to US and Europe as the wage level of Japan remained flexible and has been continue declining. When the labor force is losing purchasing power and the jobs are evaporating, the same labor force (consumers) stop spending.

    http://www.tradingeconomics.com/japan/inflation-cpi

    The Inflation above 2% IS NOT ATTAINABLE.

  • -1

    bokuwamo

    andrewfx51FEB. 24, 2013 - 09:46PM JST @bokuwamo Tu quoque.

    Most posters would acknowledge the economic problems in their respective countries, but directing attention towards the US or Europe doesn't make Abe's economic policies any more credible. Nor is it the topic of this article.

    I will wait to see how long it is before this gets deleted. "Nor is it the topic of this article"

    Really, your a moderate as well as poster? The subject is economics Isn't it? Japan economy is not allowed to be compared to other countries in relationship in the subject matter of the article?

  • 0

    globalwatcher

    GWFeb. 24, 2013 - 05:45PM JST

    What J-Inc should do is tell abe they will only consider wage increases IF companies can more easily let staff go when they are found to be dead wood or in actual tough times, right now they cant & is HUGE reason why wages are stuck or in decline.

    This is already happening in Japan since Koizumi took office. It is called a labor subcontracting. These workers are not a permanent employees of organizations. They can come and go very easily. That's not a cause of wage decline. The problem of Japan is that we are all in global economy competing with labor inexpensive countries that can produce the same goods and service at a 1/10th of Japanese workers. More and more low tech jobs in Japan are shipped out to these countries.

  • 4

    tkoind2

    Abenomics, as most of us have been saying since the start, is boneheaded nonsense destined to make things worst.

    Simple. Prices go up, taxes go up, wages go down, job security goes down, spending stops and so does the economy. That about covers it.

    Funny how I never need a crystal ball of fortune teller to read Japan's future. Politicians roll out ideas that have already written the future in bold neon. Sadly that bold sign never says anything positive.

  • -3

    bokuwamo

    Japan's economy has been for a very long time, not good. Abe received the votes to make changes, the voters wanted to see take place. Many before him have tried to use different ideas and approaches to resolve the problems. Reading and hearing all the things that are wrong with Abe's proposals and ideas, what is not going to work and are bad ideas. Where are the policies and ideas that will make positive economic recovery possible? What are they? Who has the better plan for Japan's economy? And why wasn't this person, who has the better ideas, elected to office?

  • 0

    BertieWooster

    The turn out for the last election was low - just above 50%.

    You could say that the LDP won, but it might be more accurate to say that the opposition, divided and unfocused, failed to make much of an impression on anyone but their close friends and relatives.

    With prime ministers changing every few months, and no visible change occurring as a result of this, the voting public was largely driven into apathy.

    "What's the point of voting? It doesn't change anything."

    And now we have Abe and his wrecking crew to contend with.

    I am sure the term "Abenomics" will be used in the future for companies that went belly up after they mismanaged their finances.

    "What happened to XYZ Co., Ltd?"

    "Abenomics."

    "Did they? What a shame. And they were doing so well!"

  • 1

    globalwatcher

    . Where are the policies and ideas that will make positive economic recovery possible? What are they? Who has the better plan for Japan's economy? And why wasn't this person, who has the better ideas, elected to office?

    There are some solutions to the problems but they are not perfect solutions.

    1)Economic structural changes initiated by both Public and Private Sectors to maximize efficiency in economic output. Why do you still focusing too much on Exporting model? You need to produce goods and services that Japanese need first.

    2) Go head-on and accept an unique demographic change in Japanese population. Japan is not willing to do that. You can increase efficiency and productivity in the change of socio economics by adopting high tech and immigration reforms .

    3)Reform and restore value in Education and R&D for long term growth.

    I believe in The Wealth of Nation written by Adam Smith. Japan is producing a bunch of college grads with no higher technical skills. Japan is competing with other labor inexpensive countries like China, India. These workers can produce same goods and services at a 1/10th of Japanese workers. Japan needs to compete in different market that needs higher technologies with a bang.

    4)Entitlement reform.

    Help these who are out of work to get a new work skill. With new skills, they can find work instead of being on welfare.
    Health care cost (payout to healthcare providers) has to be evaluated and reformed.

    5)Tax reform There are too many holes that need to be filled.

    6)Political reform. You know what I am talking about here. Ladership changes in Japan is almost a joke.

    7)Public Spending cut Too many unproductive bureaucrats are on payrolls. Get rid of them who are not productive.

    8)Too Much Central Government control needs to be changed. Give more power to governors of each Prefecture.

  • 0

    Crazedinjapan

    "Age old" it's too systematic here...no one is flexible in thinking here. Top that up with outrageous greed from the upper echelons of these companies and you get stagnation followed by bankruptcy. It will be a sorry day when is foreigners are actually allowed to reap any benefits to maintaining a viable business here without gauranters and are eligible to loans and subsidies that they take for granted.

    It's come a long way in the last decade where you couldn't open a bank account in Tokyo area..to being able to open one. If Abe really want to get companies in line to change he should loosen restrictions and ease visa requirements to those that want to reside and capitalize on the gold mine this country is sitting on. Many foreign businesses have pulled out of this country because of the slow result process, language barriers and decision making process that delays or hinders production here. Yes they may be good at what they do but it takes way too long to do it.

  • 2

    subyyaki

    “If labor costs rise, earnings improvement will stop, and there will be another economic downturn,” said one survey respondent representing a wholesaler.

    That says it all. Companies across the world do not care about anything other than their profit. This is a self defeating belief system. The wealth of the world is like a pie and if the companies piece of that pie keeps getting bigger, other people's piece has to shrink. Ironically for the companies, while they keep all their profits in the bank and continue to shrink employee benefits, they are reducing the size of their customers piece of pie and subsequently they will go out of business. When did continuous growth in profits replace the desire for sustainability?

  • 0

    Crazedinjapan

    Sub well said!

  • 0

    Xeno23

    Has the "blow" already been delivered? Isn't it too early to tell? Of course, once a program has been declared a failure, it's typically too late.

    I recall a time, pre-bubble, when wage increases in Japan were viewed with suspicion, because the Japanese saved their surplus income rather than pumping it back into the economy. In an economy perceived as poor, would people do more saving? Maybe not in the USA, but Americans are spendthrifts, so they're not a good model.

    These days profit growth is sustainability; maybe not continuous profit growth, but without consistent growth in profits, a business will fall behind in global competition - unless it enjoys a monopoly market. And by global competition, that includes small, local shops too, because even the local cobbler has to compete with cheap shoes from abroad.

    A lot of us are blinded into thinking profits are evil because we see what some rapacious corporations and their staff are doing, but it's just not the case overall; modern business, market, economic improvement is fueled by profit.

  • 0

    globalwatcher

    Maybe not in the USA, but Americans are spendthrifts, so they're not a good model.

    Economic model in free and fair trade formula is:

    GDP is a sum of Capital Spending, Investment Spending and the (Export Income - Import Expenditure).

  • -1

    Tony Ew

    Even if the salary is increased, certain sectors that sell products that take up quite a bit of space will not do well. Perhaps they will buy as a replacement older futons, older cars, older furniture, but not new stuff due to limitation of space in many Asian societies, including Japan. People in that part of the world don't mind cramming together so how much space is left for products that are too big to fit? Consumers in these industries will probably be hesitant to spend but will instead put the extra pay for drinks, holidays perhaps, any kind of consumables, small items and services.

  • 0

    overchan

    Japan, USA, europe, have less population thab China. Chinas economy is rising. Guess who is falling. Theres only one way to stop that. Make a free market and leave china outside

  • -1

    globalwatcher

    Make a free market and leave china outside

    1.3 billion population is a big market to ignore. China is okay as long as they are willing to play a fair game, but they are not. CCP and Chinese military have been underestimating how the rest of the world is lowering a tolerance bar against them lately.

  • -1

    GW

    Xeno,

    Are you aware that over 70% of J-companies DONT pay any income tax, been like this for ages, so even with a market with little competition lots of companies profit margins are crap!

    These 70% set up so that their employees pay all the income tax & govt for some stupid reason certainly doesnt discourage this kind of company, its one of the bizarre things that is Japan, but one thing is for sure a LOT of this 70% could easily go under with a hint of competition & thats why the govt doesnt allow much competition & why so many loser companies get ca$h from govt, etc keeps proping up these deadbeat companies & that means OTHER companies cant make better profits so they ALL suffer & here we are.

    Japan is still in for a heap of pain, most still dont recognise this though

  • 0

    gonemad

    One of the backbones of the Japanese economy has been electronics manufacturing. During the last years, very few of the companies in this sector have been profitable, most of them bleeding vast amounts of red ink. These companies are still in the middle of restructuring and even when they manage to turn around within the next year(s), they will need any cash they can get for investments, which they were forced to neglect for too long time already. Expecting these companies to raise their wages now is a bit on the naive side, isn't it?

  • 0

    globalwatcher

    Expecting these companies to raise their wages now is a bit on the naive side, isn't it?

    Continued to decline. That's why I am not optimistic if Abenomics will be successful. I am not even sure if the inflation target of 2% is even attainable. This BOLD action of BOJ was very needed about 20 years ago before Japan going into spiral deflation. 20 years too late, IMHO.

    Without wage rises, Japan could be left with BAD inflation, where a weak yen pushes up import prices as household earnings stagnate. That would hurt, rather than boost, demand and growth.

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