Hitachi first announced intentions to abolish seniority-based pay hikes in 2003, but didn’t follow through. Change is more likely under Abe’s current administration as higher wages are integral to his effort to beat deflation and boost spending.
Data suggests his efforts are paying off: regular pay rose 0.7 percent in July from the year before, the second consecutive month of increases; June saw the first rise in over two years.
Although employees will welcome performance-based compensation, it won’t be enough to revitalize corporate governance in the drastic manner Abe is hoping for, Takuji Okubo, principal and chief economist at Japan Macro Advisors, said.
“There has to be more incentives for managers to care about share price and interest of equity rather than just expanding their power or wages,” Okubo said.
Still, the majority opinion is positive. If Hitachi – the embodiment of Japan Inc – goes through with the move, others could follow suit. Japan Post said it would introduce performance-linked pay this year, while Sony is expected to implement the system next year.