• Kyodo

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Prime Minister Shinzo Abe on Wednesday asked business leaders to agree to pay hikes in next spring’s shunto wage talks as the Japanese economy struggles to beat chronic deflation.

It is the fourth straight year that Abe has made the request to company executives. Despite years of efforts under his Abenomics policy mix, Abe, who took office in 2012, has yet to fully create a virtuous cycle of wage growth and robust consumer spending in Japan.

“I hope to see wage hikes that would be at least on a par with this year,” Abe told a meeting held at the Prime Minister’s Office in Tokyo attended by business leaders.

“I’d like to ask for pay-scale increases,” Abe said.

One of the participants, Sadayuki Sakakibara, chairman of Keidanren, which represents Japan’s largest companies, said “we hope to keep the momentum for pay hikes.”

However, speaking to reporters, Sakakibara struck a cautious note about making a “strong” request to Keidanren member companies to consent to pay-scale hikes, but indicated raising bonuses is an option to realize an increase in annual income.

Japanese companies tend to be more cautious about agreeing to pay-scale increases, as base-pay rises are more difficult to roll back if business conditions deteriorate.

For the fiscal 2016 wage talks, Keidanren also asked its member companies to achieve annual income growth but gave them the option of denying pay-scale hikes and offering one-time increases in bonuses instead.

Major automakers and electronics companies have given pay hikes the past three years, but Abe’s latest request comes at a time of heightened uncertainty about the global economic outlook following the victory of Republican Donald Trump in the U.S. presidential race.

Japan’s listed companies are expected to report the first drop in five years in combined operating profits for the current business year through March, according to analysts.

In recent years, while big companies were able to raise pay for full-time workers, employees of smaller companies and part-time workers often received little or no pay increase.

The Japanese Trade Union Confederation, the nation’s largest labor union body known as Rengo, has decided to call for a pay rise in the upcoming wage talks for fiscal 2017 starting in April.

“What’s important is to raise monthly wages,” Rengo chief Rikio Kozu told reporters.

After attending the gathering, Akio Mimura, head of the Japan Chamber of Commerce and Industry, expressed his view that companies with increased profits should proactively offer pay hikes.

Under Abenomics, which includes bold monetary easing by the Bank of Japan, the yen weakened through last year against the dollar and other currencies for the benefit of major exporters like Toyota Motor Corp.

But the yen reversed course this year and strengthened against the dollar, at least until very recently, weighing on the profits of exporters as a strong yen reduces their overseas profits when repatriated.

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