Key sectors to hike pay but amid caution

by Hiroko Nakata

Major automakers and electronics companies said Wednesday they will raise base wages and bonuses for a third consecutive year but the increases will be moderate this time because of global economic uncertainties.

Many companies are expected to log brisk earnings for the business year ending March 31. But managers appeared reluctant to raise pay in light of the yen’s continuing rise against the dollar, climbing oil and other commodity prices, and unanswered questions on how the U.S. subprime mortgage loan crisis will affect the Japanese economy.

As the annual “shunto” spring wage talks peaked Wednesday, Toyota Motor Corp., the nation’s top automaker, offered a basic monthly pay hike of ¥1,000 — the same as last year. Its union had sought a ¥1,500 raise.

Nissan Motor Co. agreed to its unions’ request for an average wage hike of ¥7,000 per month, compared with ¥6,700 last year.

Honda Motor Co. was more cautious, agreeing to a basic wage hike of ¥800, which is ¥100 lower than last year and below the ¥1,000 hike sought by its union.

Most of the electronics firms’ pay hikes were similar to what was offered the previous year.

In response to a uniform demand for a ¥2,000 increase in basic monthly wages in the electronics sector, Matsushita Electric Industrial Co., Mitsubishi Electric Corp., Sharp Corp., Toshiba Corp and Fujitsu Ltd. each offered ¥1,000, the same as the previous year.

The annual wage talks in the auto and electronics industries are closely watched because they set the trend in other sectors.

But economists are not very optimistic about what the impact of the wage hikes will be on the economy.

“Companies replied with good figures despite the future uncertainty of their business results,” said Toshihiro Nagahama, senior economist at Dai-ichi Life Research Institute Inc.

“But we cannot expect a very positive impact on the consumer spending as the figures appear to be,” he said.

Nagahama said any impact will be limited because some companies did not truly offer to increase salaries and instead proposed that the offered funds be allocated to welfare and other services for employees.

For example, Matsushita said it will give each employee ¥12,000 for a year to support expenses for child care and nursing care and efforts to improve business skills or attend school.

Toshiba agreed to give ¥1,000 per month on average to high-level workers in certain manufacturing sections and employees engaged in child-rearing.

Meanwhile, major steelmakers Nippon Steel Corp. and JFE Holdings Inc., which conduct wage negotiations biennially, agreed to increase their night work allowances to 33 percent from 30 percent, compared with 35 percent as requested by the union.

Rosy corporate earnings have encouraged unions to increase their demands. They insist wages hikes are necessary to support personal spending power that has been eroded by higher prices for oil and other commodities, and to shore up consumer buying power, which has dragged down domestic economic demand, they said.

The unions were initially encouraged by Fujio Mitarai, chairman of the Japan Business Federation (Nippon Keidanren), Japan’s largest business lobby, who called on companies with favorable earnings to increase wages. He later toned down the comments.

Earlier this month, Prime Minister Yasuo Fukuda urged companies to raise wages to soothe public stress over rising prices.

“I think now is the time when the fruits of reform should be passed on to the people and household budgets,” Fukuda said in a weekly e-mail magazine released earlier in March.

Managers at companies that log brisk profits had previously backed wage hikes, but they were increasingly worried about several negative economic developments.