• Kyodo

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Bonuses at Japanese companies are expected to fall this summer by around 1% to 3% from a year earlier due to the novel coronavirus pandemic, a development that would add downward pressure on private spending, according to recent projections by six entities.

The decline in summer bonuses per employee, forecast by four think tanks and two security firms, follows a 2.6% fall in winter bonuses and a 0.5% increase in summer bonuses last year from year-earlier levels.

Daiwa Securities Group Inc. projected the largest fall of 3.9% in this year’s summer bonuses, while Mizuho Research & Technologies Ltd. estimated the smallest decline of 1.3%.

The level of this summer’s bonuses is largely affected by a company’s business performance in the second half of fiscal 2020 that ended in March.

Despite the recent recovery trend supported by robust growth in the Chinese economy, manufacturers may offer smaller bonuses because of the prolonged effect from the first half of fiscal 2020 when they were hit hard by the pandemic.

Nonmanufacturers such as eateries and those in the logistics sectors are likely to cut bonuses deeply as the government’s call on the public to stay home and avoid nonessential outings to curb the spread of the coronavirus has dampened their sales.

Daiwa Securities said 40.45 million employees are expected to receive summer bonuses this year, down 1.1% from the previous year.

Total bonus payouts are estimated to fall 5.2% to ¥14.9 trillion ($137 billion).

“The impact of the coronavirus on the level of bonuses is reflected later so at the time of winter bonuses last year, the level had not hit bottom,” said Toru Suehiro, a senior economist at Daiwa Securities. “It will take a considerable time until private consumption improves.”

The six entities, also including the Dai-ichi Life Research Institute, the Japan Research Institute, Mitsubishi UFJ Research and Consulting Co. and Nomura Securities Co., made the projections based on monthly labor data released by the Ministry of Health, Labor and Welfare covering firms with five or more employees.

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