The Japanese state minister in charge of economic and fiscal policy told reporters last week that the government of Japan would “react” to those firms who don’t fall in line to Prime Minister Shinzo Abe’s economic policy, called “Abenomics.”
The policy—a combination of loose monetary policy, increased government spending, and minimal structural reform—was born in attempt to jumpstart Japan’s zombie economy. The focus point right now is calling for companies to increase base wages before a 3 percent tax increase in April.
The Ministry of Economy, Trade, and Industry noted that it will “name and shame” the top companies involved in Japan’s yearly wage negotiations by the end of May if they do not increase their minimum wages.
Though it’s an executive order short of increasing federal minimum wage, it’s not shy of strong-arming firms into policies born for short political gain. It’s one thing to ask companies to increase their base wages voluntarily; it’s quite another to threaten those companies that refuse.
Cutting government spending and expanding fiscal freedom should be one of Japan’s top priorities. Japan dropped to 27th in the World Bank’s Ease of Doing Business 2014 index and has failed to push any further with joining the Trans-Pacific Partnership, a free trade agreement that is already behind schedule because of opposition from Japan’s agriculture sector, which is so unproductive that its farmers make less money from farming than they do from their pensions, subsidies, and non-farm earnings.
With the government of Japan now pushing companies to increase their base wages, it will be interesting to see how yearly bonuses will be negatively affected, how less able firms will be negatively branded, and how more and more companies will have to increase layoffs (something Japanese companies already have a hard time with), potentially leading to an overall less productive business environment.
