Cabinet Office, Government of Japan

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Annual Survey of Corporate Behavior(Summary)FY2007(April 25,2008)

Background and purpose of the survey

Although companies seem to have had an insufficient employment condition during the continued and long-term economic recovery since 2002, wages have not been rising since the latter half of 2006. With the labor market changing because of diversified forms of employment, the relationship once observed that insufficient supply in the labor market leads to higher wages seems to have been changing. In addition, this sluggish rise of wages draws attention in relation to household income and consumption trends.

This survey researches wage revisions by age group and by employee type for regular and non-regular employees, the excessiveness or insufficiency of employment conditions, the business conditions of companies that are considered to be closely linked to the employment situation, increases or decreases in the number of employees, factors that hold wages down, and the continued employment of baby-boomers, and goes into the relationships among these items.

Organization of the survey results

Chapter I, following the previous surveys, provides the results of the research on the business environments and basic management policies surrounding companies, i.e. expectations of economic conditions, demands, foreign exchange rates, and purchases/sales prices, and the current states and expectations of the capital investment, employment, and overseas production.

In Chapter 2, the results of the survey on the business conditions, the excessiveness or insufficiency of employment conditions by age group and by employment form, the rate of increase in the number of employees, the wage revision rates as well as the factors that curb wage increases, the forms of continued employment of the baby-boomers and the wage levels of continued employment are compiled, to give an understanding of the background of wage revisions as a special feature.

Survey system

(1)Period of the research: January 2008.

(2)Survey items:

(i) Business environment and management policy

(ii) Background of wage revision

(3)Coverage: corporations listed in the first and second sections of stock exchanges in Tokyo, Osaka and Nagoya (2,513 companies in total).

(4)Survey method: self-reporting mailing method using prescribed questionnaire.

(5)Number of companies that responded: 1,035 (545 of manufacturing sector and 490 of non-manufacturing sector).

(6)Response rate: 41.2%.

Main findings of the survey

  1. Looking at the future prospect for the Japanese economy by listed companies, the forecast of real economic growth rate is 1.8% for the next three years (FY2008 -2010) (2.1% in the survey of the previous year) and 1.9% for the next five years (FY2008-2012) (2.1% in the survey of the previous year). The forecast of nominal economic growth rate is 1.6% for both periods (1.7% for both periods in the survey of the previous year). All of these figures are below those of the survey of the previous year. The nominal figures are continuously below the real figures for this year, as in the previous year. The survey results for the prospect of industry demand in the future, show that the forecast of real growth rate is below that of the survey of the previous year for both next three-year and five-year periods, and the forecast of nominal growth rate is the same as that of the previous year for the next five-year period, but is below that for the next three-year period. The nominal figures are again below the real figures for this year.

    The results for the forecast of the exchange rate for the next year, show the total industry average is 111.0 yen per dollar, slightly stronger than the current 112.3 yen per dollar in the month immediately before the survey, and also stronger than the 115.5 yen per dollar given in the survey of the previous year. The rate for the break even for export companies is 104.7 yen per dollar, stronger than the 106.6 yen per dollar of the previous year, but the difference from the current rate is smaller than that of the previous year.

    Looking at the average purchase price and average sales price for the next year, an increase larger than that of the survey of the previous year is expected. The average purchase price largely increases to 5.4% from 2.4% in the survey of the previous year, while the average sales price largely increases to 1.8% from 0.2% in the survey of the previous year. Therefore, the terms of trade get worse because the increase in the average purchase price is larger than the increase in the average sales price.

    Result for the prospect of capital investment for the next three years (FY2008- 2010), shows the rate of 5.1% on average for all industries, which is slightly down from the 5.3% of the survey of the previous year(decline for the second consecutive year).

  1. Looking at the combination of overseas and domestic production, the rates of companies producing overseas increase to 65.9% in the results for FY2006 and 66.3% for the estimate of FY2007, but slightly decrease to 66.0% for the prospect of FY2012. All these figures, however, exceed the figures in the survey of the previous year (63.2% in the results of FY2005, 62.8% for the estimate of FY2006 and 62.4% for the prospect of FY2011).

    The rate of overseas production is 17.3% in the results of FY2006, 18.2% for the estimate of FY2007 and 19.3% for the prospect for FY2012, all exceeding the figures in the survey of the previous year (15.2% in the results of FY2005, 16.1% for the estimate of FY2006 and 17.3% for the prospect of FY2011).

    By industry, the rate of overseas production increases for processing-type manufacturing industries, but the rate of the number of companies producing overseas increases in the estimate for FY2007, and flat for the subsequent years. The rate of overseas production increases for material-type manufacturing industries, and the rate of the number of companies producing overseas also increases for the estimate of FY2007, but decreases for the prospect for FY2012. In view of the above, while the rates of overseas production increase for companies that have already started overseas production, some companies may stop particularly in material-type manufacturing industries.

    The rate of reverse imports (rate of exports to Japan from overseas production) is expected to decline, standing at 23.9% in the results of FY2006, 23.5% for the estimate of FY2007 and 22.2% for the prospect of FY2012, all of which are below the figures in the survey of the previous year (26.1% in the results of FY2005, 25.5% for the estimate of FY2006 and 25.7% for the prospect of FY2011).

    The results for the reasons for Japanese companies to have domestic production bases, show that those who answer "the technology used is advanced and overseas production is difficult" amounted to 24.4%, the most popular answer given, as in the survey of the previous year. And the answer "it is possible to respond to Japanese demand in ways such as producing many kinds of products in small volumes" is the next most popular response. In addition, by industry, the number of those who answer "it costs less to use the existing production facilities" increase in both material-type manufacturing industries and processing-type manufacturing industries.

    On the other hand, for the reasons for Japanese companies to establish overseas production bases, the percentage of those who answer "local product demand is high or is expected to rise in the future" is 38.2% (33.0% in the survey of the previous year), the most popular answer. And the next most popular answer is "good and cheap labor is available," standing at 32.1% (35.4% in the survey of the previous year) and replacing the most popular answers in the previous year. By industry, the most popular response is "local product demand is high or is expected to rise in the future" for material-type manufacturing industries, as in the survey of the previous year, standing at 44.4%.

  1. Now let's look at the employment situation and the corporate business conditions that is the background to wage revisions, and the relationship with the revision rate by age group and by employment form. The past and future employment trends of companies remained steady, with a large increase in the number of employees for the past three years and a large increase expected for the next three years, exceeding the figures in the survey of the previous year.

    Looking at the business conditions of companies (the rate of the number of companies who answer "good" minus the rate of the number of companies who answer "bad"), the rate largely drops to 1.8% from 19.2% in the previous year for the current situation of all industries. But the rate for the next year is expected to largely increase to 14.3%. By industry, the rate declines for the manufacturing industry from the survey of the previous year, and the rate of the non-manufacturing industry turns to negative. For the next year, the rate is expected to increase for the manufacturing industry and is expected to recover to a positive figure for the non-manufacturing industry.

    The results for the excessiveness or insufficiency in number of employees (the rate of the number of companies replying "insufficient" minus the rate of the number of companies replying "excessive") for all industries, show that the number of regular employees in their 40s or younger is insufficient, with the number of those in their 20s or younger the most insufficient at 55.2%. On the other hand, the number of employees in their 50s or older is excessive.

    These trends are the same for non-regular employees, but the excessiveness and the insufficiency are both smaller for every age group compared with the regular employees. In addition, by industry for the manufacturing industry and non-manufacturing industry, the trends are the same for both regular employees and non-regular employees.

    Looking at the rate of non-regular employees on a total industry average basis, that of employees in their 60s or older is especially high at 76.9%, and that for employees in their 50s or younger is in the 10 percent range. By industry, the trends are the same, and in every age group, the figures are higher in the non-manufacturing industry than in the manufacturing industry.

  1. The rate of increase in the number of employees for this year on a total industry average basis (the median) is the highest for employees in their 20s or younger at 3.2% and the lowest for those in their 50s at 0.3%. For non-regular employees, the rate of increase is the highest for employees in their 60s or older at 2.4% and the lowest for those in their 50s, standing at 0.9%, as in the case of regular employees. These trends are almost the same for both regular employees and non-regular employees by industry, and are the same for the prospect for the next year.

    The relationship between the current business condition and the rate of increase in the number of employees for this year for all age groups in all industries is that the 60 percent range of companies increased the number of their employees for both regular and non-regular employees, for those companies that reply "good" about the current business condition, while the 40 percent range that reply "bad".

    The relationship between the excessiveness or insufficiency of employment condition and the rate of increase in the number of employees for the next year for all age groups in all industries is that 76.2% of companies increase the number of their regular employees, and 82.3% of companies increase that of their non-regular employees for those answer "insufficient", while the rate are as low as, in the 20 percent range for both regular employees and non-regular employees for those answer "excessive". Therefore, for both regular and non-regular employees, the current business condition, the insufficiency of employment condition and the rate of increase in the number of employees are correlated.

  1. The rate of wage revision for this year on a total industry average basis (the median) is higher for lower age groups for all employees and regular employees, the highest in their 20s or younger with 2.0% for all employees and 2.1% for regular employees. The rate of wage revision for employees in their 60s or older is about one-fifth of that figure, the lowest of all the age groups. These trends are almost the same by industry. For non-regular employees, the rate of wage increase is almost the same for employees in their 20s or younger, 30s and 40s, while lower for those in their 50s and the lowest in 60s, but overall differences are small.

    The rate of wage revision is lower for non-regular employees, in every age group. And especially for those in their 20s or younger, the rate is half of that for regular-employees. The difference in the rate of wage revision between regular and non-regular employees is overall larger in the lower age groups, and this trend is almost the same by industry.

    The relationship between the current business condition and the rate of wage revision for this year for all age groups in all industries is that 91.3% of companies that reply "good" increase the wages, while 86.8% that reply "bad", 84.8% that reply "not good or bad", increase the wages of regular employees. For non-regular employees, the rates are 63.9%, 63.3% and 60.3%, respectively, all below the rates for regular employees.

    The relationship between the excessiveness or insufficiency of employment condition and the rate of wage revision for this year for all age groups in all industries is that the stronger the insufficiency, the higher the rate of wage revision.

  1. The most important of the factors to curb wage increases (the reason coming first) is "no sales increase" followed by "emphasis on going-rate levels in wage revision" and "increased purchase price of raw materials, etc." and those trends are almost the same for the combined first three reasons.The situation of the continued employment of baby-boomers is that the employment form in which employees are transferred "from regular employees to non-regular employees" is exceptionally high at 77.4%, and the wage level in that case is 56.2% of the level before the transfer.

Contact

Questions about this survey can be made to HERE

Cabinet Office, Government of JapanEconomic and Social Research Institute
1-6-1 Nagata-cho, Chiyoda-ku, Tokyo 100-8914, Japan.