As Prime Minister Shinzo Abe pushes for labor reforms, hopes are growing that it may alter the country’s deep-rooted culture of overwork and nudge more workers toward striking the right work-life balance.
The recent start of Premium Friday, an initiative led by the government and the private sector, is symbolic of Abe’s drive. It encourages employees to finish work earlier than usual on the last Friday of each month and to increase consumption — a soft spot in the deflation-hit economy.
Whether it will bear fruit remains to be seen. Changing the mindset of Japanese workers, and their habit of putting in long work hours, will be a critical and formidable challenge for Japan, according to economists.
“As much as it is a social issue, labor reform is an economic one in terms of shoring up the growth potential of the Japanese economy,” a government panel said in a report in March when it called for putting a cap on overtime work hours.
Abe left his office early to do seated meditation at a temple on Feb. 24 when the Premium Friday campaign began, and went to his vacation house outside of Tokyo on March 31, the second Premium Friday.
By finishing work at 3 p.m., government officials and economists hope, Japanese workers will loosen their purse strings and increase spending on weekend travel, entertainment and eating out.
According to recent government data, household spending on eating out marked a nearly 17 percent gain on Feb. 24 compared with the last Friday of February 2016. Average household spending, meanwhile, slipped an inflation-adjusted 3.8 percent in February, which had one less day than a year ago.
For the initiative to have a substantive effect on the economy, however, participation by more companies and spreading it beyond Tokyo to regional areas are seen as vital.
One survey conducted by a committee seeking to boost awareness of the new program showed only 17 percent of around 2,000 workers were able to finish work early on the inaugural Premium Friday.
The economic benefits of the campaign appear to be meager for now, but economists say it is too early to draw any conclusions.
“I expect the initiative will take root because the trend in Japan is for cutting long work hours,” said Koya Miyamae, senior economist at SMBC Nikko Securities Inc. “But we may need a year or two to see (whether it will prove successful) from a longer-term perspective.”
Japanese consumers’ reluctance to boost spending is proving to be a headache for policymakers as critics point to the limits of the Abenomics policy mix more than four years after Abe took office.
Private consumption, accounting for roughly 60 percent of gross domestic product, was flat in the October-December period from the previous quarter and it is expected to grow only moderately.
SMBC Nikko Securities estimates Premium Friday will lift the country’s consumption by up to ¥63.5 billion a year, while the Dai-ichi Life Research Institute has a cautious projection that the initiative will produce a mere 0.03 percentage point boost to private consumption in nominal GDP for 2017.
With his sharpened focus on labor reforms, Abe stresses the importance of wealth redistribution and calls for companies to raise wages.
The labor reform panel headed by Abe is seeking to ensure “equal pay for equal work,” making its case for no discrimination between regular and nonregular workers.
Japan’s jobless rate fell below the 3 percent mark to 2.8 percent in February, the lowest in over 22 years. Nonregular workers now account for around 40 percent of the total workforce in Japan.
“Changing how people work and enabling more elderly workers and women to live up to their potential are critical for Japan to solve labor shortages and to achieve sustained economic growth,” said Junko Sakuyama, senior economist at the Dai-ichi Life Research Institute.
Income growth among young workers in their 20s and 30s as well as those aged 60 and older has been stagnant, Sakuyama said, adding that worries about social security are keeping consumers from stepping up spending.
The government will prepare legislation to enforce a series of changes to the country’s work system, including limiting maximum overtime to 100 hours in a single month. The future of Abenomics is seen to increasingly depend on the success of labor reforms.
“There are still doubts about whether we can change our culture, lifestyles, and long-established labor practices,” Abe said in late March. “But I’m confident that the year 2017 will be remembered by future generations as a starting point for Japan’s labor reforms.”
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