Japan eyes bigger tax breaks for firms that hike wages

TOKYO (Reuters) - Japan’s government is considering expanding tax incentives for companies to encourage them to raise wages, three people involved in discussions told Reuters, as many firms remain hesitant to spend their cash reserves on salary increases.

The current incentives are set to expire at the end of this fiscal year through March 2018. The government wants to continue them and expand them, said the sources, who declined to be identified because they are not authorised to speak to media about the matter.

The government has been urging Japan Inc to hike salaries with the aim of spurring economic activity and inflation.

But despite a tight job market, companies are reluctant to raise wages out of concern they will not be able to pass on the costs to customers who are accustomed to two decades of mostly falling prices.

Total cash earnings rose a revised 0.7 percent in August compared with the same month last year, labour ministry data shows, but adjusted for inflation they fell 0.1 percent.

Public broadcaster NHK reported earlier that the government wants annual wage negotiations next spring between companies and unions to result in a 3 percent wage increase.