Japanese companies have pared back year-end bonuses for employees by the most since the global financial crisis, putting additional pressure on consumer spending amid signs of a slowing economic recovery.
Individual bonuses for employees fell 9% from a year before to ¥865,621, according to a weighted average of special payments by 164 large corporations tallied by major business lobby Keidanren. That’s the steepest drop since 2009, when winter bonuses slumped 15%.
The thinner payouts are likely to serve another blow to seasonal spending following the decision by Prime Minister Yoshihide Suga to call a temporary halt to a domestic travel initiative around the New Year’s holiday. The Go To Travel campaign has been one of the government’s key tools for boosting consumption.
The bonus data also confirms the delayed response of Japan’s biggest companies to reduce overall compensation amid the pandemic. Firms largely honored previously agreed to payments in the summer. Bonuses then edged down 2.2%.
Service companies took a bigger hit with a 13% drop, compared with a 7.5% slide among manufacturers.
Of the 16 industries, the commerce sector, including department store operators, posted the steepest fall, of 32.8%. The hotel industry logged the lowest average bonus, at ¥351,687.
The commerce and hotel sectors were hit chiefly by a drop in the number of tourists amid the spread of the novel coronavirus.
Japanese companies use bonuses to cut costs in a downturn while maintaining base pay and jobs for their salaried workers. Though unemployment has soared in many countries during COVID-19, the main jobless rate in Japan remains low at 3.1%.
Still, the economy needs consumer spending to continue fueling the recovery. The government, already concerned that the economy risks losing recovery momentum, unveiled a stimulus package of about ¥73.6 trillion earlier this month. But some of the impact of the measures is likely to be delayed with the travel campaign on hold amid concern it could be contributing to record virus cases.
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