In a potential setback for Prime Minister Shinzo Abe’s drive to revive economic growth, Sumitomo Mitsui Banking Corp.’s labor union will not seek a hike in base wages at annual salary talks, sources close to the matter said Tuesday.
Hit by the Bank of Japan’s negative interest rate policy, major banks have seen their share prices fall with investors fearing the impact of lower rates on earnings.
The labor union of SMBC, the core unit of Sumitomo Mitsui Financial Group Inc., will forgo calling for a pay-scale hike for the first time in three years. It will finalize the decision after hearing from its members, then submit a request to the management next month, the sources said.
The decision would likely affect other unions in the banking industry. The unions of the Bank of Tokyo-Mitsubishi UFJ and Mizuho Bank are expected to draw up their own requests soon.
Abe has been calling on large firms to spend more of their profits on wages and investment to help boost the economy. This, he hopes, will spur consumer spending.
The BOJ, whose monetary stimulus is a central part of Abenomics, implemented negative interest rates last week, charging 0.1 percent on additional reserves parked by banks with the central bank in an attempt to encourage them to lend and invest.
But the radical policy, announced in January, caused turbulence in the markets.
Banks were already having a difficult time expanding their lending businesses due to sluggish demand. Lower rates could also weigh negatively on profit margins from lending as well as financial products.
The three largest banks — BTMU, Mizuho and SMBC — raised base wages by 0.5 percent in 2014 and 1.5 percent in 2015, respectively.