Deceleration of Government-made Spring Round

Watching shadow of Japanese economy, the groundhog seems to have retreated to its burrow. On the day of show down in 2016 spring round of labor offensive, wages of workers proved to be as less resilient from deflation as it had been last year. To the message of Shinzo Abe administration for creating positive cycle of economic growth through higher wages, corporations replied with negative attitude in distributing their profit to employees. Trickle down theory in Abenomics does not look to be working.

Major companies in car making, electric appliances and steel producers answered to the demands of their labor union with less growth of labor wages than last year on Wednesday. The top car maker, Toyota Motors, degraded increase of monthly wage from ¥4,000 last year to ¥1,500. Workers for Honda will receive only ¥1,100 more than last year, while they enjoyed high wage hike of ¥3,400 a year ago. Most manufacturers contained their wage hike within a half of last year’s level.

“Trend of business environment has changed,” said President of Toyota, Akio Toyota. Toyota has been positive in raising salary for two years. But, from the beginning of this year, Nikkei average showed steep decline along with monetary policy of United States or deceleration of emerging economy including China. Growing value of Japanese yen against U.S. dollar put great pressure on exporters like Toyota. Managers of corporations decided that it was not the time for paying more salary to its workers as long as economic trend would not be preferable.

Abe administration has been encouraging major corporations to raise salary of their workers. While finishing reconstruction tax on corporations, the government introduced lower corporate tax rate. It was aimed at higher wage for workers in big companies, which would have positive impact on mid or small businesses. Abe dreamed “positive economic cycle” with smooth circulation of wealth in every corner of Japanese economy. Needless to say, however, each business entity is independent from the government in terms of handling its management.

Even in two previous years of high growth of wages, “actual wage” has been declining. Wage hike could not catch up with inflation. Introducing higher consumption tax rate damaged positive mind of consumers. According to Asahi Shimbun, actual individual consumption, which occupies 60% of gross domestic products, is lower than the level before Abe administration. In the meeting of analyzing international monetary at Prime Minister’s residence on Wednesday, Joseph Stiglitz, Professor of Columbia University, recommended Abe not to raise consumption tax rate next year. If Abe decides it, breaking open promise when he once postponed it, it will mean disaster of Abenimics.