Japan Inc. Cuts Bonuses to Put More Pressure on Spending
(Bloomberg) -- 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 by 9% to 865,621 yen ($8,368), 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 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. Employees at two Japan Railway companies ended up with almost $3,000 less in extra payments than last year, while steel workers took a 25% hit.
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 more than $700 billion 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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