Business leaders said they will do their part to ensure that Japan emerges from years of deflation as Prime Minister Shinzo Abe steps up calls for companies to raise wages and bolster capital expenditure.
The leaders of the three major business lobbies said Tuesday they believe the economy will recover moderately in 2016, although concerns about China’s economic slowdown and rising tensions in the Middle East have led to a recent sell-off of global stocks.
“We need to do our utmost and pave the way (for Japan) to declare an end to deflation,” said Sadayuki Sakakibara, chairman of the Keidanren organization.
Speaking at a news conference after a New Year’s celebration organized by Keidanren, the Japan Chamber of Commerce and Industry and Keizai Doyukai (Japan Association of Corporate Executives), Sakakibara said he will encourage firms to raise income levels for workers in upcoming annual wage negotiations with labor unions.
Akio Mimura, chairman of the Japan Chamber of Commerce and Industry, said corporate managers “hold the key” to beating deflation.
“When we look at consumption behavior and investment activities by companies, we see that we have yet to get out of deflation,” Mimura told the event attended by more than 1,800 corporate leaders and other people.
Economic growth in Japan remains shaky as both consumer and capital spending lack vigor. To put the economy on a path of sustainable growth, Abe, with his Abenomics economic policy package, has been urging companies that have posted record profits to raise wages.
“It’s a crucial year” in the national effort to create a sustainable “virtuous circle” of growth, Toyota Motor Corp. President Akio Toyoda told reporters at the event.
Toyoda, who touched on the importance of fostering human resources, said “thorough negotiations” are important between management and labor unions when it comes to wages.
The Bank of Japan has also decided to extend support to companies proactively investing in human resources, as it aims to achieve its 2 percent inflation target around the second half of fiscal 2016.
In a separate gathering organized by the Japanese Trade Union Confederation, known as Rengo, BOJ Gov. Haruhiko Kuroda pressed his case for wage hikes in accordance with rising prices. He said the bank will take bold monetary easing steps “if needed.”
Rengo President Rikio Kozu also stressed the need for better pay for workers, saying his organization will demand that companies raise base salaries rather than bonuses when the shunto annual wage talks begin this month.
Many corporate executives appear willing to consider pay hikes in the coming months. Some argue, however, it may be difficult for small and medium-size companies that have been struggling due to the yen’s weakness and labor shortages.
“The mindset of corporate managers is gradually shifting toward spending,” said Yoshimitsu Kobayashi, chairman of Keizai Doyukai.
But he added that companies with abundant cash on hand but cautious about the future, as well as consumers who appear willing to save money, must be encouraged to spend more.