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By Bloomberg

Toyota Motor Corp., which analysts estimate will earn more profit this fiscal year than all the other Japanese carmakers combined, could be ready to spread the wealth.

As Toyota raised its fiscal-year profit forecast to a record 2.13 trillion yen ($18.1 billion), the manufacturing giant said it may ease up on its usual practice of squeezing suppliers to lower prices of auto parts. The idea: leave some gains to companies lower down the supply chain so they have the resources to boost wages.

“We are having discussions on price revisions right now and we are trying to escape from the deflationary environment in Japan,” Toyota Managing Officer Takuo Sasaki told reporters Wednesday in Tokyo. “We hope this will lead to a virtuous cycle for the Japanese economy.”

If implemented, Toyota’s move would provide some of the momentum Prime Minister Shinzo Abe needs to overcome Japan Inc.’s apathy toward wage increases and help Asia’s second- largest economy out of two decades of deflation. It’ll also be payback for the stimulus and monetary easing that has weakened the yen and lined the pockets of exporters led by the auto industry.

“We value that Toyota cares not only about wages but also the suppliers,” Chief Cabinet Secretary Yoshihide Suga told reporters Thursday in Tokyo. “We expect companies to follow Toyota.”

Toyota slipped 0.9 percent to 7,655 yen at the 11:30 a.m. break in Tokyo trading. The shares have climbed 31 percent in the past 12 months, compared with a 21 percent gain in Japan’s benchmark Topix index.

Rising Costs

Even after lifting its annual profit forecast for the second time in as many quarters, Toyota’s projection is still short of the 2.16 trillion yen that analysts’ estimate the company will earn for the year ending in March. Japan’s seven other carmakers may report about 1.8 trillion yen in combined net income for the same period, according to data compiled by Bloomberg.

Toyota dropped its biannual price-cut demand for the six- month period ending in March for air-bag and steering wheel maker Toyoda Gosei Co. and bearings and electronics manufacturer Jtekt Corp. Both companies said plans are still being finalized for the first half year of the fiscal year beginning in April.

“We are not taking profit out of this because we are just passing on to our sub-contractors,” said Hisaki Nagai, a spokesman for Toyoda Gosei, which is 46 percent owned by the Toyota Group. Jtekt joined Toyota and Toyoda Gosei in raising base salaries last year for the first time in six years, spokesman Kenji Ando said.

Japan Recession

Japan’s economy probably limped out of its fourth recession since 2008 last quarter, with a report on Jan. 30 showing industrial production eking out a gain in December after a slide the previous month.

For Japanese consumers, rising living costs and an increase in the sales tax last April led to prices outpacing their first base wage gain in eight years in 2014. So while average earnings climbed 0.8 percent, pay adjusted for inflation fell 2.5 percent last year, the labor ministry said Wednesday in Tokyo.

This trend is putting pressure on Japanese companies to pass on some of the gains from a weaker yen by boosting domestic wages and investment. Toyota and its labor unions are entering spring negotiations that are set to conclude in March and establish pay and bonuses for the upcoming fiscal year.

If Toyota abstains from demanding price cuts, its largest suppliers have said they would in turn skip asking for reductions from the smaller peers that provide them parts and raw materials, Managing Officer Koki Konishi told reporters.

“We understand we are at very important phase for the Japanese economy,” Konishi said. “We think it is important to have economic revitalization to penetrate second- and third-tier suppliers and for the whole Japanese economy to set a positive attitude.”