Japan rises out of recession, but winter bonus down

While the economy continues to recover, bonuses for public servants is expected to be lowered for the first time in a decade.
By: | November 17, 2020

After three consecutive quarters of contractions of 1.8, 0.6% and 8.2% in Q4 2019, Q1 and Q2 this year, respectively, Japan’s GDP grew 5% in Q3 2020, lifting the country out of recession.

The rebound was attributed to a record 4.7% increase in private consumption as households raised their spending on cars, leisure and restaurants. External demand also boosted 2.9 percentage points to the GDP growth with exports up by 7.0%, said Reuters quoting a government official. 

However, analysts are not optimistic that the economy is out of the woods. “The economy may not fall off a cliff. But given uncertainty over the outlook, I would err on the side of caution in terms of the pace of any recovery,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. 

Earlier, Japan’s National Personnel Authority had recommended the lowering of bonuses for national public servants for the first time in 10 years. 

In its recommendation to the Diet, the country’s parliament, and the cabinet, the government agency proposed that national public servants’ annual bonuses in fiscal 2020 be lowered by 0.05 month of salary to 4.45 months, said Nippon.com. 

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If the recommendation is approved, their annual pay is projected to decrease by an average of 21,000 yen (US$199). 

The agency made the recommendation because bonuses in the private sector have declined due to the impact of COVID-19. Private-sector bonuses are estimated at 4.46 months of salary on average, compared to last year’s bonuses of 4.50 months paid to national public servants, said a survey by the agency. 

However, not all in the private sector are expected to get their winter bonuses – often considered part of their salary, said an NHK news report. A survey of 147 unions found that nearly half of their workers are expecting much smaller payouts, if any. “It looks like winter bonuses will be the lowest in decades or possibly ever,” said secretary-general of National Confederation of Trade Unions Kurosawa Koichi. The cuts are expected to be particularly steep at mid-and-small-sized companies.