TOKYO (Reuters) - Japanese companies are warming to mobilizing their mountains of accumulated cash for mergers and acquisitions but remain stubbornly resistant to wage increases, a Reuters poll showed on Monday.

A picture illustration shows Japanese 10,000 yen notes featuring a portrait of Yukichi Fukuzawa, the founding father of modern Japan, taken in Tokyo August 2, 2011. REUTERS/Yuriko Nakao/File Photo

Prime Minister Shinzo Abe’s government has struggled for years to coax companies to lift wages, seen as the missing link for a sustainable growth cycle led by consumer spending. But deep-seated doubts stirred in part by Japan’s shrinking population have left them loath to take on higher fixed costs.

Instead they have hoarded their cash or, increasingly, begun looking to overseas acquisitions as a way to escape the limitations in their home markets.

“We might think about expanding our foothold overseas or corporate buyouts,” a manager at a wholesaler wrote in the survey.

Japan’s economy is quietly plodding ahead, on track for its longest post-war economic expansion after an initial burst from the launch of “Abenomics” nearly five years ago. But wage growth has lagged and inflation remains subdued.

Asked how they intended to use their internal reserves in the future, 23 percent of companies in the survey said for mergers and acquisitions, versus only 4 percent that said wage increases.

Only 5 percent said they were already deploying their cash for M&A, and just 3 percent said they were already tapping their reserves for wage hikes.

One-third of companies plan to spend reserves on domestic capital investment while 13 percent aim to invest overseas. Another 20 percent said they would hold onto their cash.

“We want to avoid having too little in reserve, so we won’t spend any of it no matter what we are told to do,” wrote an official at a precision machinery manufacturer.

The survey, conducted Oct. 26 to Nov. 7 for Reuters by Nikkei Research, polled 547 big and mid-sized firms, which replied on condition of anonymity. About 245 companies answered the questions on internal reserves.

TWEAKS TO ABENOMICS

Nearly two-thirds of companies said they wanted a continuation of the three-pronged “Abenomics” recipe of hyper-loose monetary easing, fiscal spending and structural reforms, which breathed new life into the economy immediately after its launch nearly five years ago.

But there was also support for tweaks to the three individual components, as respondents urged a step back from negative interest rates, a commitment to a balanced budget, and the implementation of long-stalled structural reforms.

“Abenomics should focus on a growth strategy to revive the economy, preferably with support from fiscal policy,” said a manager at an electronic equipment manufacturer in the survey’s written comments.

“Easing monetary policy to the extent of adopting a negative interest rate policy produces side effects, and it is time to consider tapering.”

Only 21 percent called for pursuing an alternative to Abenomics, while 17 percent thought it was not being pursued aggressively enough.

Asked what part of Abenomics they thought needed adjustment, a majority of respondents, at 58 percent, pointed to the “third arrow” of growth strategy and structural reforms, which have come under criticism for failing to tackle difficult issues such as Japan’s rigid labor markets.

Another 40 percent cited monetary easing, with many calling for dialing back the Bank of Japan’s massive monetary stimulus, while 28 percent sought tweaks to fiscal policy. Multiple choices were allowed on this question.

Companies were upbeat about the prospects for sorting out Japan’s fiscal woes, with three-quarters of respondents saying it was possible to rein in public debt, while 69 percent called for setting a target for a balanced budget. Abe postponed the government’s target for the fiscal year to March 2021 and has not yet set a new deadline.

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