Interview: Lawson Chief Boosts Wages To Fight Deflation

Lawson Inc. will increase the annual salaries of 3,300 or so full-time employees in their late 20s through their 40s by an average of 3%. The move, which will take effect at all group companies starting next fiscal year, is aimed at helping Japan end deflation by stimulating consumer spending. The president of the convenience store chain, Takeshi Niinami, who also serves on the government's advisory panel on industrial competitiveness, discussed his views in a recent interview with the Nikkei.

Q: What is the objective of the pay hike you have announced?

A: The weakening yen and stock market rally are improving the earnings of Japanese companies, but it will be two to three years before this translates into job creation and higher wages. It will not be easy to keep people motivated for that long on expectations of future jobs and pay growth. If Japan wants to overcome deflation and revive its economy, companies need to do their part. Artificial measures such as public investment have very limited effectiveness in stoking economic growth.

Q: Aren't you being criticized by other CEOs for grandstanding?

A: At a meeting of the Industrial Competitiveness Council, I said that our society must be such that people in their prime child-rearing years can have families, even if it takes two incomes. I'm just doing my part. Most CEOs were once corporate employees themselves, so I think they would like to give their employees more if they can possibly do so.

Export-oriented industries such as manufacturers cannot absorb more workers, partly because their operations are highly automated. In contrast, distribution and other service industries hire large numbers of people at relatively low wages. It is important to raise wage levels in these industries to help revitalize our economy.

Q: Why a 3% pay hike, and only for certain age groups?

A: We want to exceed the government's inflation target of 2%. Employees in their 20s to their 40s ? those eligible for the pay hike -- account for about 70% of our workforce. Although many are raising children, they don't have much appetite for spending because of the heavy burden of basic living expenses.

In response to depressed sales revenues, Japanese companies have sought to remain profitable by cutting costs. But I think it is about time we acted to break this negative cycle -- raising salaries to boost employee morale, and with a view to higher revenues down the road. I believe such efforts by Japanese companies will help end deflation within several years.

Q: Convenience store operations are supported by the part-timers who work for your franchisees, but they won't benefit from the pay increase.

A: Some 200,000 part-timers are working at Lawson stores nationwide. Our ultimate goal is to secure higher incomes for them. To achieve that goal, we are planning a variety of activities to increase profits for our franchisees, starting in March.

One step is the adoption of a new product strategy. We don't yet have extensive product lines targeting women or the elderly. We will introduce new products for these groups and take steps such as improving the quality of vegetables at our stores to pump up sales. We will also make aggressive investments in IT to make our operations more efficient and worker-friendly.

Q: What kind of proposals are you going to make at the Industrial Competitiveness Council?

A: The entire country, from the government to companies to individual consumers, has developed a propensity to save. I have proposed a change in the corporate tax code to allow companies to write off entertainment expenses for three years. If the government can get money flowing, economic activity will eventually generate more tax revenues, ending the vicious economic cycle Japan has been trapped in for many years.

-- Interviewed by senior Nikkei staff writer Naofumi Nakamura

(The Nikkei Asian Review March 6 edition)

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