• Reuters


Prime Minister Shinzo Abe and Bank of Japan Gov. Haruhiko Kuroda on Thursday applied fresh pressure on companies to do their part in putting a sustained end to deflation by boosting wages and investment.

But the head of the nation’s biggest business lobby offered only conditional support, underscoring the difficulty policymakers face in convincing risk-shy Japanese companies to divert more of their record profits to innovation and human resources.

At an annual meeting of the business lobby Keidanren, Abe voiced hope that companies raise wages next year at a faster pace than this year, saying that boosting salaries and capital expenditure was critical for Japan to exit deflation.

Kuroda also waded in, telling the same meeting that companies who invest now will be rewarded when the central bank’s aggressive money printing succeeds in accelerating inflation to its 2 percent target.

“Fortune favours the bold,” Kuroda said, citing a famous proverb and stressing that more companies needed to be spending further on new innovation and raising salaries to lure talent in a tightening job market.

Kuroda also said the BOJ remains “unwavering” in its determination to do whatever it takes to hit its 2 percent inflation target, suggesting his readiness to expand monetary stimulus if risks threaten a broad upward trend in prices.

Despite assurances by Kuroda that Japan’s economic prospects are bright, many companies still sit on a huge pile of cash because of uncertainties over the external outlook and a shrinking domestic market as the country’s population ages rapidly.

In the meeting, Keidanren chairman Sadayuki Sakakibara praised Abe’s efforts to reflate growth and his pro-business policies such as a pledge to cut Japan’s corporate tax rate.

But he said companies had the flexibility to decide to what degree and how employees should be compensated, signaling that smaller and less-profitable firms may opt to pay one-off bonuses rather than increase base salary.

“Each company faces a different business environment,” Sakakibara said. “I’d like to urge companies to take measures that best suit their needs,” he said, adding that companies did not necessarily need to persist in raising regular pay.