The Japanese government has withdrawn tax incentives aimed at promoting wage increases to Nissan Motor after the automaker was found to have illegally reduced payments to dozens of subcontractors over two years.

According to local reports citing a “source familiar with the matter”, the government had decided to delist Nissan Motor from its list of companies eligible for the tax break after the Fair Trade Commission (FTC) last month rebuked the automaker for unfairly cutting JPY3bn (US$20m) from payments due to 36 subcontractors after contracts were signed.

This was seen as an abuse of the company’s trading power and was in violation of the country’s subcontracting law.

Major companies in Japan are required to commit to appropriate business dealings with subcontractors when they apply for the tax break. Once delisted, companies cannot apply for the tax break for at least one year.

The decision to withdraw the tax incentive from Nissan came at a time when the Japanese government was urging local companies to increase wages to help keep household incomes in line with inflation, following sharp prices rises in the last two years.

Nissan agreed with its labour union to increase wages by 3.4% last year and by 5% in 2024.

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