Japan's PM leans on companies to up wages as tax hike looms

Japanese Prime Minister Shinzo Abe urged companies Tuesday to increase wages to help mitigate the expected downside effects of the nation's sales tax hike in April.

Abe said that it would be crucial for companies to increase salaries by April to bolster business and consumer sentiment and ensure continued spending, at a time when the prime minister is trying to aggressively steer the nation away from decades of deflation through his signature economic policy dubbed "Abenomics" .

"Whether many companies raise salaries in April will be critically important as April is also the beginning of the country 's new fiscal year," Abe told a meeting of his Liberal Democratic Party (LDP).

"There is no other way but for each company to try its best to exit from this persistent deflation," he added.

In a bid to quell global concerns that Japan's tax hike from 5 to 8 percent beginning on April 1 will diminish corporate and public spending and investment, Abe said that he plans to attend the annual World Economic Forum in Davos this month, to explain Japan's position and economic intention.

Abe said that a number of mechanisms have been put in place to support companies who raise employee wages, including tax cuts and other government-backed corporate subsidies.

He has urged companies to follow in the footsteps of Toyota Motor Corp. and Hitachi Ltd. who have both raised salaries for their workers, stating that his administration wishes to see wages increase more than prices and for the nation to enter a "virtuous cycle as quickly as possible where economic growth propels corporate profits, employers raise compensation and workers spend."

Abe also told his ministers Tuesday at the first meeting of the year that the northeastern seaboard, the site of a devastating earthquake-triggered tsunami and nuclear meltdown in March 2011, should remain a focal point for reconstruction and economic revitalization efforts.

Chief Cabinet Secretary Yoshihide Suga, meanwhile, told a news conference after the meeting that revitalizing the world's third- largest economy, while maintaining fiscal discipline was the government's overriding economic principle going forward.

Finance Minister Taro Aso said that the government plans to pass two more state budgets, one for fiscal 2014, with allocations in the form of stimulus measures made to counter the predicted fallout from the tax hike, as businesses and consumers will likely curb spending causing a decline in economic output as the sales tax is raised.