JEI's Spin on the News

Bonuses Wilt In Summer Heat

Wednesday, July 21, 1999

According to a mid-July survey of 1,164 firms by Nihon Keizai Shimbun, the average salaried Japanese worker's summer bonus was ¥720,046 ($6,000 at ¥120=$1.00), a decline of nearly 5.8 percent from the year before. The drop was the largest since the leading Japanese economic daily began conducting such surveys in 1975 and was the first fall in five years. 35 of 40 sectors surveyed reported paying a smaller summer bonus this year, explaining the overall decline. Bonuses rose more than 3 percent in both 1996 and 1997, but eked out only a 0.3 percent gain the next year.

Among 850 manufacturers, the summer bonus averaged ¥699,607 ($5,830), 7.22 percent less than in 1998. Only one sector — food products — boosted the bonus, while six other sectors that recorded an increase last year were less generous this time around.

The 314 nonmanufacturing companies that responded to the survey said they too cut the summer bonus 2.8 percent to an average ¥763,884 ($6,366), the second consecutive annual decline. 17 of 21 nonmanufacturing industries reported paying lower summer bonuses, including a 30.2 percent plunge by the hotel and travel industries.

Big employers led the way on cost-cutting. Firms with 25,000 to 29,999 workers slashed bonuses an average 10.9 percent. Mitsubishi Electric Corp., for example, topped this group by reporting an 18.6 percent decline.

Changing sentiments about the economy's prospects are reflected when companies are sorted by when they decided on bonus amounts. Firms that set their summer bonuses last winter averaged a 5.8 percent decline. Those that set them this spring were harsher, imposing a 7 percent reduction. Companies that set summer bonuses immediately before they were paid, however, averaged only a 3.6 percent drop. And firms that recently decided both this year's summer and winter bonuses were most optimistic, cutting the extra paychecks by just 0.9 percent from the previous year.

While the smaller summer bonuses likely will keep consumers in cautious frame of mind. The fact that companies which made bonus decisions most recently appear to be least pessimistic is yet another indicator that Japan's economy may be turning around.

JEI's Spin on the News" are the opinions of one of more members of JEI's staff and do not necessarily represent the views of the organization.

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