Japan
government plans to raise minimum wage in stimulus
package to revive economy
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[November 23, 2015]
By Takashi Umekawa and Stanley
White
TOKYO (Reuters) - Japan's government plans
to raise the minimum wage and introduce other steps to revitalise the
economy, but the draft of stimulus measures seen by Reuters on Monday
appeared to break no new ground on reforms that analysts say are needed
to end decades of stagnation.
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Prime Minister Shinzo Abe's government will also offer some
financial support to people living off their pensions to bolster
consumer spending, a copy of the draft obtained by Reuters showed.
Citing unnamed sources, the Nikkei newspaper said on Monday that the
government is planning to raise the minimum wage by 3 percent. But
the draft didn't provide any specifics and analysts say the
government will need to do more to foster durable growth.
Raising wages is an urgent task for policymakers as Tokyo is keen to
ramp up consumer spending, which is seen as crucial to boosting
domestic demand and pulling the economy out of 15 years of
deflation.
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However, some economists remained sceptical of the plans because
they do not do enough to address Japan's rigid labour market and low
worker productivity.
"This sounds like short-term stimulus, but Japan needs structural
reforms more than stimulus measures," said Marcel Thieliant, Japan
economist at Capital Economics in Singapore.
"We might get a growth spurt for the next one to two years, but this
will not lead to stronger growth in the long term."
BOWL OF RAMEN
The economy has fallen into recession twice since Abe took office in
late 2012, and his government is under pressure to show that it can
improve the economy with a package of steps due this week.
The national average of Japan's minimum wage was at 780 yen ($6.33)
per hour in the last fiscal year, so a 3 percent increase would
still not buy more than a bowl of ramen noodles - an illustration of
the daunting task policy makers face in boosting consumption and
growth.
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The minimum wage has been rising for the past few years, but Japan's
rates are only slightly above the average for OECD members, and
labour unions have argued for bigger increases.
The government will also loosen regulations to encourage capital
expenditure by small firms, and provide a time frame for lowering
the corporate tax rate below 30 percent to improve competitiveness,
the draft showed.
The government has already committed to lowering the corporate tax
rate to around 31 percent next fiscal year, but companies have been
asking for bigger tax cuts.
Economics Minister Akira Amari will present the draft at a meeting
of the government's top advisory panel on Tuesday. Abe's government
is due to finalise the economic stimulus measures by the end of this
month.
($1 = 123.2000 yen)
(Editing by Shri Navaratnam)
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