The government and the ruling parties decided on Nov. 28 that companies will be given a reduction in corporate tax payments if they raise wages by 2% or more compared to the previous year as part of a “taxation program to facilitate the income expansion.” Big-name corporations will not be entitled to a tax break if they cannot meet this criterion. Meanwhile, smaller firms will be given a tax reduction even though their wage increases are less than 2%, but if the increases exceed 2%, the corporate tax reduction will be expanded to over 20%. The taxation program is aimed at encouraging businesses to increase wages by clarifying the percentage of wage increase.

Prime Minister Shinzo Abe has been calling on the business community to increase wages in annual labor-management talks to be held in the spring of 2017. Since 2014, big-name corporations have increased wages by more than 2% for three consecutive years, but concerns abound that wage increases in 2017 may slow down due to poor earning performances. (Abridged)