Resurrecting Japan By Genzo Kimura in Tokyo March 19, 2014 The Torch has been passed onto the Corporate Sector Abenomics is now heading into its second stage. Whilst the BOJ had been the key player during its initial stage, the attention and onus is now on corporate Japan.

Toyota Motor announced a base salary hike last week which means that as of April, employees will benefit from a JPY 2,700/month additional income on top of the scheduled annual pay raise (which equates to JPY 7,300/month). Family Mart, Kikkoman, Nissan, Asahi Kasei, Aeon and other major companies shown in the table below have also announced wage hikes. But at the same time, there are companies which will not raise base pay. For example, smaller car manufacturers such as Suzuki and Daihatsu have opted not to do so as taxes on smaller vehicles will rise in 2015 leaving management cautious.

Wage increases may not be enough to maintain household purchasing power to offset the consumption tax hike (similar to a VAT hike) and energy-led inflation. But we believe this is an important step for the Japanese economy to move forward. In the current job market, the number of job offers exceeds that of job applicants, a suggestion that further wages hikes may be on the horizon. This is especially true for the service sector.

This year’s spring salary increase is merely a kick off to show Japanese corporations’ central role in the economy. We expect to see capital spending by Japanese companies back in full swing in 2014 as many companies had postponed non-urgent spending for years after the global financial crisis.

Table 1: The result of wage negotiations in spring 2014 (in JPY) Monthly Salary Company Increase Annual Raise Rise in Base Pay Toyota (7203) 10,000 7,300 2,700 Family Mart (8028) 10,000 5,000 5,000 Kikkoman (2801) 9,770 8,770 1,000 Nissan (7201) 9,500 6,000 3,500 Asahi Kasei (3407) 9,327 6,807 2,520 Aeon (8267) 8,327 6,127 2,200 Duskin (4665) 8,200 6,570 1,630 Toray (3402) 7,604 5,804 1,800 Lawson (2651) 7,500 4,500 3,000 Nitori (9843) 7,200 5,027 2,173 JR Tokai (9022) 7,080 5,580 1,500 Koito MFG (7276) 6,220 5,220 1,000 Source: Reuter, Japanese Trade Union Confederation

Disclaimer This marketing communication is issued by Sumitomo Mitsui Trust International Limited (“SMTI”). SMTI is authorised and regulated by the United Kingdom’s Financial Conduct Authority (the “FCA”), whose address is 25 The North Colonnade, Canary Wharf, London, EC3N 2AA, Any enquiries regarding the products United Kingdom. This marketing communication has been made available to you only because SMTI has classified you as a professional should be made to: client in accordance with the FCA’s rules. If you have received this marketing communication from a source other than SMTI, you should contact SMTI before using it or relying on it. You must not send this marketing communication to any other person without first having received written approval from SMTI. The information contained in this marketing communication (the “Material”) is being made available for information purposes only and is designed to provide information on the investment services which SMTI may offer to clients. Nothing in the Yusuke Karube Material amounts to or should be construed as an actual offer by SMTI to provide any investment services to any person. If SMTI agrees to Director, International Sales provide any investment services to any person, those services will be the subject of a separate written agreement between SMTI and that person. Furthermore, the Material has not been prepared with any consideration of the individual circumstances of any person to whom it is Sumitomo Mitsui Trust International Limited communicated. Accordingly, it is not intended to, and does not, constitute a personnel recommendation in relation to the purchase or sale of, 3rd Floor, 155 Bishopsgate, or exercise of any rights in relation to, any financial instruments or advice in relation to any investment policy or strategy to be followed. The Material also does not contain the results of any investment research carried out by SMTI and is not intended to amount to a financial London EC2M 3XU, UK promotion of any particular financial instrument which may be referred to in it. While SMTI uses all reasonable endeavours to ensure the Material is accurate, it has not been prepared with a view to any person relying on it. Accordingly, SMTI accepts no responsibility for any loss Direct: +44 20 7562 8460 caused to any recipient of this document as a result of any error, inaccuracy or incompleteness in the Material, nor for any error in the [email protected] transmission or receipt of this communication.