The bonus is in the bank

July 14th, 2010 by Philip Brasor & Masako Tsubuku

Japan Post wants your bonus, too

Japan Post wants your bonus, too

The life insurance company Sonpo Japan DIY just released its annual survey, in which it asks about 500 carefully selected housewives whose husbands are salaried employees between the ages of 20 and 50 what they plan to do with this summer’s bonus. The bonus is one of the cleverest ideas ever developed by the Japanese business world. Ostensibly, bonuses are tied to a company’s good fortune or an employee’s performance, but Japanese workers have always deemed them to be part of their salaries, and tend to plan their finances accordingly. Employees and employers look at bonuses differently: The former see them as an entitlement, while the latter use them as a safety valve.

Consequently, for the past several years, many companies have reduced bonuses and some have even eliminated them as profits have tanked. The Sonpo survey, though it’s rather small, is significant since it gives some idea of how the economy affects the average household.

The good news is that the average bonus this summer was ¥670,000 after taxes, which is about ¥115,000 more than it was last year. This is the first time in three years that the trend has reversed. About 41 percent of the respondents said that their bonuses increased from last year, while a little more than 28 percent said it went down. What’s still a bit scary is that, of the respondents who said their bonuses were less than last year’s, the average decrease was ¥159,000.

Perhaps of more concern to the government is what these people are doing with their bonuses. According to a survey by a research panel in the Bank of Japan, 74.2 percent said they planned to put all or part of it in their savings. Last year, the percentage who saved was a little more than 50; 39.6 percent said they would spend theirs on “everyday life,” and 37.6 percent said it would go toward repaying a mortgage or other loans. Not much economic stimulation going on there, which could mean that those companies will continue to be stingy with their bonuses in the future.

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