November 29, 2017 / 9:07 AM / a year ago

Japan government expects shorter work hours to cut workers' pay by 5 trillion yen: sources

Office workers are reflected in a glass railing as they cross a street during lunch hour in Tokyo June 1, 2015. REUTERS/Thomas Peter/File Photo

TOKYO (Reuters) - Japanese workers’ pay will fall by as much as 5 trillion yen ($44.86 billion) as the government moves to reduce the country’s notoriously long working hours, two government sources said on Wednesday.

The government’s plan to lower the number of overtime hours worked is part of a program to increase productivity and draw more women into the workforce to keep the economy growing.

Prime Minister Shinzo Abe’s government is also asking companies to raise wages by 3 percent next year at annual negotiations with labor unions.

The government hopes that increase will offset any decline in pay as a result of working less overtime, the sources said.

However, there is no guarantee that all companies will raise wages as requested and there is a risk that a net decline in wages for some employees who work less overtime will harm consumption.

“Cutting overtime pay will cost around 5 trillion yen,” one source said.

“We hope companies compensate their younger employees with benefits and special allowances.”

Since taking office in late 2012, Abe has enacted policies to encourage companies to raise wages, increase the number of female workers, improve pay for contract workers, and shorten working hours.

Abe’s government has argued these steps are needed to strengthen consumer spending and eliminate the risk of returning to deflation.

Reporting by Izumi Nakagawa; Writing by Stanley White; Editing by Kim Coghill

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