Overall Corporate Performance Improvement... Service Sector Leads
Inflation Outpaces Growth... Consumer Spending Boost Likely Difficult
Japanese companies are set to pay the largest winter bonuses on record this year. Analysts attribute the increase in bonuses to improved service sector performance, driven by a surge in foreign tourists visiting Japan amid the end of the COVID-19 pandemic and the continued weak yen. However, some point out that despite the significant rise in year-end bonuses, the steep inflation trend may limit the boost in consumer spending.
On the 19th, Nihon Keizai Shimbun (Nikkei) reported that the average winter bonus per employee at major Japanese companies increased by 2.62% from the previous year to 865,903 yen (approximately 7.88 million KRW). This marks the highest amount since Nikkei began surveying winter bonuses in 1975.
Nikkei analyzed that the overall improvement in corporate performance influenced the rise in bonuses. When calculating net profits for incorporated companies excluding the finance and insurance sectors, net profits for the fiscal year ending March 2023 (April 2022 to March 2023) increased by 18% year-on-year to 74 trillion yen, the largest ever recorded.
Notably, the service and other non-manufacturing sectors showed strong performance improvements. Net profits in the non-manufacturing sector rose 5.16% year-on-year, with 12 out of 15 non-manufacturing industries seeing profit increases.
In particular, the hotel and travel industry (15.18%) and rail and bus sectors (17.78%) continued their strong performance from last year. Nikkei stated, "The normalization of economic activities has expanded tourism demand and personal consumption, leading to favorable conditions in the service sector."
On a company-by-company basis, bonuses in the passenger and transportation sectors saw significant increases. Japan Airlines (JAL) will pay a winter bonus of 987,000 yen (approximately 9 million KRW), up 80.3% from the previous year, while East Japan Railway Company (JR East) set its bonus at 957,300 yen (approximately 8.73 million KRW), a 17.54% increase. JR Kyushu will also pay 698,517 yen (approximately 6.37 million KRW), up 32.8% from last year.
Department store chain Takashimaya set its winter bonus at 1,138,379 yen (approximately 10.38 million KRW), a 12.01% increase from last year. Takashimaya’s bonuses have been steadily rising for four consecutive years.
Bonuses at semiconductor companies, which are receiving stronger government policy support, also saw significant increases. The company with the highest winter bonus in Japan this year is Disco, a semiconductor manufacturing equipment firm. Disco plans to pay a bonus of 3,594,132 yen (approximately 32.81 million KRW), up 13.62% from last year. Nikkei explained, "The global shift to electric vehicles (EVs) has increased demand for power semiconductors, leading to record-high consolidated net profits for the fiscal year ending March."
Although most Japanese companies are celebrating a winter bonus boom, Japan’s inflation remains high this year, dampening expectations that this will translate into increased consumer spending. Japan’s consumer price index (CPI) for October, which is used to calculate real wages, rose 3.9% year-on-year. With inflation exceeding 3% for 16 consecutive months, wage increases are not keeping pace with rising prices. Nikkei added, "Ultimately, companies must raise employee wages and bonuses at a rate exceeding inflation, which requires productivity improvements and profit growth."
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