Sony to Cut Pay as PM Abe Calls for Higher Wages

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Sony Corp is likely to cut average pay next year in a rare move for a big Japanese company, and one that goes against Prime Minister Shinzo Abe's push for higher wages to get the economy moving.

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For a second year, Abe is pressuring major companies to raise base pay in the fiscal year from April, and boost investment, to kick-start a positive cycle of higher wages, profits and prices to end 15 years of deflation.

Japan's main union of electronics workers is likely to demand a hike of over 2 percent in base pay, and companies are widely expected to comply. Most Sony workers, however, don't belong to the Japanese Electrical Electronic & Information Union, and the company's average pay of 8.85 million yen ($74,000) is among the industry's highest.

Sony is going through a painful restructuring after cutting its earnings forecasts six times in two years, and the once-storied electronics maker said earlier this year it will overhaul its salary structure for the first time in a decade, without elaborating on expected changes in pay.

"We are at this time studying various issues as Sony overall is in a difficult situation," spokeswoman Yo Kikuchi told Reuters. "The current human resources system was put in place around 10 years ago, so it was also time for a review."

Pay cuts are unusual in Japan, especially at big companies with their tradition of jobs-for-life and seniority-based compensation. Employers typically adjust to hard times by trimming bonus and overtime pay and hiring fewer new graduates.

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While Japan's economy is fitfully recovering under 'Abenomics', with profits at record highs, Sony remains in a defensive mindset. In September, the company widened its annual net loss forecast to 230 billion yen from 50 billion yen and scrapped its dividend for the first time since going public.

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Kikuchi said details of the pay cuts have not been decided, although the overall average is likely to decline. The overhaul will focus on improving meritocracy, meaning employees who do not hold management titles but are in leadership roles may be paid more, while some others could see a cut.

"First and foremost, we're hoping employees can be paid and graded according to the roles they play. Cost effectiveness should improve as a result," she said.

Takahiro Nonaka, general secretary of the electronics union, said it has not yet set its official position, but higher pay is crucial for the economy. The union is likely to demand the same 2 percent rise as Japan's pace-setting metal workers' union, which includes carmakers.

"Personal spending, which accounts for around 60 percent of GDP, needs to grow," Nonaka told Reuters. "We want to share that understanding with companies as we negotiate."

(Additional reporting by Reiji Murai; Editing by William Mallard and Ian Geoghegan)