Reuters TOKYO (Reuters) — Japanese companies are warming to mobilizing their mountains of accumulated cash for mergers and acquisitions but remain stubbornly resistant to wage increases, a Reuters poll showed on Monday.
Prime Minister Shinzo Abe’s government has struggled for years to coax companies to lift wages, seen as the missing link for a sustainable growth cycle led by consumer spending. But deep-seated doubts stirred in part by Japan’s shrinking population have left them loath to take on higher fixed costs.
Instead they have hoarded their cash or, increasingly, begun looking to overseas acquisitions as a way to escape the limitations in their home markets.
“We might think about expanding our foothold overseas or corporate buyouts,” a manager at a wholesaler wrote in the survey.
Japan’s economy is quietly plodding ahead, on track for its longest post-war economic expansion after an initial burst from the launch of “Abenomics” nearly five years ago. But wage growth has lagged and inflation remains subdued.
Asked how they intended to use their internal reserves in the future, 23 percent of companies in the survey said for mergers and acquisitions, versus only 4 percent that said wage increases.
Only 5 percent said they were already deploying their cash for M&A, and just 3 percent said they were already tapping their reserves for wage hikes.
One-third of companies plan to spend reserves on domestic capital investment while 13 percent aim to invest overseas. Another 20 percent said they would hold onto their cash.
“We want to avoid having too little in reserve, so we won’t spend any of it no matter what we are told to do,” wrote an official at a precision machinery manufacturer.
The survey, conducted Oct. 26 to Nov. 7 for Reuters by Nikkei Research, polled 547 big and mid-sized firms, which replied on condition of anonymity. About 245 companies answered the questions on internal reserves.
Nearly two-thirds of companies said they wanted a continuation of the three-pronged “Abenomics” recipe of hyper-loose monetary easing, fiscal spending and structural reforms, which breathed new life into the economy immediately after its launch nearly five years ago.Speech