Japan’s weak yen has translated into record-profits for Toyota, the country's biggest company. Now employees will reap the benefits, and get a pay raise for the first time since 2008.
Toyota, along with Honda and Toshiba, will pass on the profits to workers with a salary bump, as of April 1, company heads told unions on Wednesday. The company estimates workers will get an average 2.9 percent raise.
A Toyota Motor Worker’s Union member will earn on average an extra $26 (2,700 yen) per month in base pay, Bloomberg reported, citing Senior Managing Officer Naoki Miyazaki, who spoke with reporters today.
The Toyota union represents over 50,000 employees, and they will
also receive higher average bonuses.
High profits are driven by ‘Abenomics’, the Japanese premier’s set of measures to stoke the economy and spur growth after decades of decline, with a commitment to keep the yen weak.
Japan-based exporters like Toyota, Honda, and Panasonic have benefitted greatly from profits spurred by the country's weak currency. Many have left prices abroad unchanged and seen sales climb due to advantageous foreign exchange rates.
Favorable market conditions for Japanese exports has translated into record profits, especially for companies like Toyota, which by the end of March is forecasting a 1.9 trillion yen profit, Bloomberg reported.
The Toyota Camry, one of the best selling cars in America, is priced at $22,500. The Corolla, also a top-10 best seller, goes for $16,500. Offering free bells and whistles- like air conditioning and other add-ons usually cost extra.
Luxury brand arm Lexus has seen sales and profits jump, especially in markets outside the US like Europe and the Middle East - where sales are up 19 percent in 2013. Scion, the sport division of the brand, hasn’t fared as well.
The pay raise comes just ahead of a planned sales tax increase, the first since 1997. In April, sales tax will increase by 3 percent to 8 percent, and then eventually to 10 percent.
This adds consumer pain to corporate pain as the country already has one of the highest corporate tax rates in the developed world at 38 percent.
“Deflation should be eliminated from Japan as quickly as possible,” Toyota’s Miyazaki said on Wednesday. “Toyota and the union will make a contribution. We have a role to play.”
Increasing sales tax is one of the policies of ‘Abenomics’, Prime Minister Shinzo Abe’s economic strategy that includes aggressive monetary policy, flexible fiscal policies, and growth reforms.
More sales tax will hopefully help fight deflation.
“Consumer prices are likely to be lifted by at least 2 percentage points after the tax hike, and we expect nominal wages to remain sluggish as overtime pay decreases,” Yuriko Tanaka, an economist at Goldman Sachs Japan Co, told the Financial Times. “In our view, a severe weakening in consumer sentiment from April will be unavoidable.”