(Adds link to video on survey results)
By James Topham
TOKYO Aug 23 Most Japanese companies will not
increase hiring in 2014 and more than one in six will take
additional cost-cutting steps as a planned sales tax hike next
year worsens economic conditions, according to a Reuters poll
that underscores scepticism about Prime Minister Shinzo Abe's
The results of the Reuters Corporate Survey offer a sobering
mid-term report card on "Abenomics" as the focus shifts from
early kudos for fiscal and monetary stimulus to worries about
deregulation and efforts to tackle Japan's enormous public debt.
Abe has promised a decision on whether to move ahead with
the proposed sales tax hike after a series of government
hearings set to begin next week with economists and business
leaders such as Toyota Motor Corp's President Akio
The success of Abe's policies will hinge on whether Japan
Inc can be convinced to hire more workers, lift salaries and
invest more in their operations to move the economy towards
sustainable growth and the 2 percent inflation targeted by the
central bank. But the Reuters survey conducted between Aug. 2
and Aug. 19 shows more caution than optimism among businesses.
Two-thirds of the 271 senior executives who responded to
questions on the sales tax said that the planned hike to 8
percent from 5 percent next April would be negative for
When Japan last lifted the sales tax, to 5 percent from 3
percent in 1997, consumer spending soared in advance of the hike
and then tumbled when it took effect. That was followed by a
recession that pushed the economy deeper into deflation.
Just under a third said they were unsure if they could pass
on the increased cost to customers. Another 28 percent said they
did not expect to be able to pass on the entire additional cost
of the sales tax hike.
Pain is set to felt most by the sectors that rely most
heavily on domestic demand. Nearly 90 percent of retailers and
all food makers responding to the poll, conducted for Reuters by
Nikkei Research, said they expected to take a hit in their
earnings from the sales tax hike.
"When you consider pricing policies as well as the consumer
mindset, it's difficult to simply lift selling prices," said one
respondent at a retailer that expects a somewhat negative impact
on results from the sales tax rise.
Highlighting the added impetus for cost-cutting as the tax
hike looms, companies sounded a cautious note on jobs.
They want to see Abe take the controversial step of making
it easier for companies to fire workers - and hire new staff
without an implicit guarantee of career-long employment. It was
by a wide margin the number one choice of half the respondents
among seven proposed labour market reforms.
Nearly two-thirds of companies said they planned to hire
about the same number of workers in the 2014 hiring season as
they did this year. Among the remaining third, those planning
reductions outnumbered those planning increases.
"If salaries don't rise, but prices do, there is the
potential for stagflation, and that is what the questionnaire is
saying to me," said Hideki Matsumura, a senior economist at the
Japan Research Institute who reviewed the survey results.
Under the easy monetary and fiscal policies of Abenomics,
Japan achieved the fastest growth among developed economies in
the first half of the year and its stock market has surged over
50 percent over the past nine months.
The corporate poll was taken alongside the monthly Reuters
Tankan survey, which showed on Thursday that Japanese
manufacturers' optimism improved to the highest level in three
years as a weak yen boosted earnings for exporters of textiles,
chemicals and steel.
But the benefits have been distributed unevenly, with many
exporters posting a sharp rise in profits in the latest quarter
while the outlook for many firms focused on the domestic economy
has been clouded by the planned tax hike.
And while gains in the stock market have spurred a surge in
luxury spending, most wage earners have largely been left
behind, fuelling worries about the long-term outlook for
The monthly Reuters Corporate Survey polls senior executives
at 400 companies capitalised at more than 1 billion yen. The
companies, which are split evenly between manufacturers and
non-manufacturers, are not required to answer every question.
The responses are provided on condition of anonymity.
(Editing by Edmund Klamann and Edwina Gibbs)