Japan Cost-Cutting Leaves Compensation Nearing Crisis Low

Cost-cutting by Japanese companies is dragging on wages, resulting in weaker consumer demand and a stronger case for monetary easing to counter deflation.

Nationwide compensation fell to 243.5 trillion yen ($3.1 trillion) in the second quarter, according to a government report in Tokyo yesterday. The number, which is seasonally adjusted, was only 0.7 percent above the level in the final quarter of 2009, which was the lowest since 1991.

Japanese companies targeting cost reductions span Tokyo Electric Power Co. (9501), the operator of the nuclear plant at the center of last year’s disaster, and exporters Panasonic Corp. and Sharp Corp. The risk for the economy is a prolonging of the deflation that has plagued the nation since an asset bubble burst in the 1990s, and weakness in consumption that may be exacerbated by a sales-tax increase in April 2014.

via Bloomberg

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