Japan Inc. Sticks With Bonus Commitments Despite Pandemic

(Bloomberg) -- Japan Inc. has largely stuck to bonus commitments made in March despite the escalation of the coronavirus pandemic since then, according to business lobby data.

Individual bonuses for employees fell 2.2% to 901,147 yen ($8,525), a weighted average of special payments by 153 large corporations tallied by business lobby Keidanren shows. That compared with a 3.4% drop a year ago.

The data indicate that Japanese companies preferred to honor previously agreed bonus payments, even though the extra payments are seen as a major tool for cutting short-term labor costs when businesses run into trouble.

A similar pattern was seen during the global financial crisis, when 2008 winter bonuses fell just 0.4% after the collapse of Lehman Brothers. Summer bonuses the following year slumped 17%, according to the lobby.

“The results this time reflect corporate earnings from fiscal year 2019, so the coronavirus’s impact on bonuses will be delayed. The winter bonuses are likely to see a far worse impact,” SMBC Nikko Securities Inc.’s Koya Miyamae said. The end-of-year bonuses could fall close to 20%, he added.

The data come after Japan was placed in a state of emergency for much of April and May. Japan’s economy is seen shrinking by more than 20% in the April-June quarter on an annualized basis, the biggest contraction in data back to 1955.

Japanese companies typically use bonuses to weather economic ups and downs while maintaining base pay and jobs for their employees.

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