Majority of Japanese companies to freeze or cut wages next year

These were the findings from the Reuters Corporate Survey, which was conducted before details of Japan’s tax plan emerged.

Although 50% of companies expect profits to rise, they are resisting the pressure to raise wages, given uncertainty over the pandemic, rising global commodity prices and a weaker yen.

Instead, three quarters of the companies polled said they would spend profits on capital spending, followed by research and development in an effort to boost productivity.

The survey shows how prime minister Fumio Kishida’s drive to revive demand may be derailed by the country’s thrift habits where stagnant wages spiral downwards, consumers hoard cash and the economy does not grow.

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Kishida has said he wants to see wealth more broadly distributed, and has urged companies to raise wages by 3% or more to boost consumer spending. A recent draft tax plan showed the government may grant tax breaks to companies which increase wages.

Around 240 Japanese large and mid-size non-financial corporations responded to the survey which was conducted between November 24 and December 3.