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No Elephants Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Feb-20-13 04:03 AM
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Exclusive: Tight-fisted Japan firms deal blow to Abe's revival plan
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Exclusive: Tight-fisted Japan firms deal blow to Abe's revival plan - Reuters survey
By Stanley White and James Topham

TOKYO | Tue Feb 19, 2013 10:34pm EST

(Reuters) - Tight-fisted companies in Japan may prove the biggest obstacle in Prime Minister Shinzo Abe's plan to push the sluggish economy into higher gear as they intend to keep a firm lid on wage levels, a Reuters survey shows.

Abe has directly appealed to Japan's biggest business lobbies to raise salaries and break more than two decades of falling average wage levels, aware of how critical rising incomes are if Japan is finally to emerge from years of deflation.

snip

About 85 percent of firms responding to a monthly Reuters Corporate Survey said they would maintain wage levels or cut them in the fiscal year starting in April.

Abe's gambit is that once a deflationary cycle of price declines that depress sales, business investment and incomes is broken, a virtuous cycle will kick in: investment will rise, leading to more, better paid jobs and greater demand.


snip

"Companies could raise bonuses, but this won't lead to sustainable gains as long as base pay remains unchanged," said Yusuke Ichikawa, economist at Mizuho Research Institute.

"If people expect prices to rise but don't expect their wages to rise, then monetary policy would become ineffective."

Abe led his party to election victory in December with pledges to end nearly 20 years of deflation and aims to use the change in BOJ leadership to shift the central bank toward the aggressive expansion of its balance sheet that he favors.

FALLING WAGES

Japan's average wages, which are closely correlated with consumer prices, have been declining since 1998, data from the National Tax Agency show.




http://www.reuters.com/article/2013/02/20/us-japan-econ...

This all sounds very familiar, except the bit about wages and prices moving (or not) roughly in tandem.
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