Labor unions at major financial institutions in Japan are giving up the idea of requesting pay hikes in this year’s shunto spring wage negotiations, hit partly by the Bank of Japan’s negative interest rate policy.
“Uncertainty over the earnings environment has been increasing” amid wariness over downside risks to the global economy and negative interest rates in Japan, a labor union official of a mega-bank group said.
The move runs counter to efforts by the government and the BOJ, which are calling for pay growth to shore up the economy and help the country out of deflation.
Among the mega-bank groups, Sumitomo Mitsui Banking Corp.’s labor union decided not to request a pay scale hike for fiscal 2016 that would boost the overall wage levels at the core banking unit of Sumitomo Mitsui Financial Group Inc.
Labor unions at Mizuho Financial Group Inc. and Bank of Tokyo-Mitsubishi UFJ followed their peer at Sumitomo Mitsui. The absence of pay hike requests at the three mega-bank groups comes for the first time in three years. The focus of their wage negotiations will be bonuses.
The unions’ decisions to forgo pay scale hike requests reflects a slowdown of general prices, a key indicator for many unions to decide what pay requests they should make to the management.
In addition, earnings prospects have grown weaker, as economic decelerations in emerging economies, such as China, and the recent financial market turmoil are expected to put a drag on booming overseas businesses, a key driver of growth for the nation’s Big Three bank groups.
The central bank’s negative interest rate policy was also a blow to the groups, which will inevitably suffer further drops in profit margins due to falls in domestic lending rates.
Another major reason for the absence of wage base hike requests was that it seems “impossible to gain depositors’ understanding” of the idea of raising bank employee wages while lowering deposit rates, a major bank official said.
The three mega-bank groups granted pay hikes of 0.5 percent in the 2014 spring wage negotiations and 1.5 percent in 2015. The management side is cautious this year, however, saying that the situation has changed.
Elsewhere in the financial industry, labor unions at Tokio Marine & Nichido Fire Insurance Co. and Sompo Japan Nipponkoa Insurance Inc. also decided not to make pay scale hike requests in this year’s negotiations, skipping such demands for the first time in two years.