Japanese Prime Minister Shinzo Abe urged companies to increase wages faster than gains in the cost of living to break the legacy of 15 years of deflation, and praised Toyota Motor Corp. and Hitachi Ltd. for pledging to help.

“What we want is for wages to rise more than prices,” Abe said in an interview in the prime minister’s official residence in Tokyo. “We want to enter a virtuous cycle as quickly as possible,” where economic growth propels corporate profits, employers raise compensation and workers spend more, he said.

The Abe administration’s reflation efforts have succeeded in stoking exporter profits with a cheaper yen that’s sent the Topix Index of stocks heading for the best year since 1999, with a 46 percent surge so far in 2013. With consumer prices now rising at an annual pace of about 1 percent, higher wages will be needed to avoid hurting households who also face a 3 percentage-point bump in sales taxes in April.

“For us to escape deflation it is extremely important that wages rise,” after they slumped more than prices declined in the past 15 years, Abe, 59, said in the Dec. 6 interview. “Some companies are already responding. For example, executives at Toyota and Hitachi have promised a raise.”

Abe pledged to forge ahead with structural reforms designed to open business opportunities in industries from health care to agriculture. He said his cabinet will adopt a program laying out deregulation priorities in the new year, with a minister placed in charge of the effort.

The prime minister has called four meetings since September with union and business leaders to persuade them to build a consensus on the need for higher wages. Officials are trying to convince Japan Inc. to deploy some of its near-record holdings of cash. Domestic non-financial private companies held 220 trillion yen ($2.1 trillion) in cash and bank deposits at the end of June, almost the size of Brazil’s annual gross domestic product, according to data compiled by the Bank of Japan.

Toyota President Akio Toyoda told government, business and labor leaders at an Oct. 17 meeting that he will consider returning increased earnings of the world’s biggest automaker to workers in the form of salaries, according to Economy Minister Akira Amari.

The Toyota City-based company, Japan’s largest manufacturer, last month raised its full-year net income forecast by 13 percent after a weaker yen contributed to producing a record 1 trillion yen in profit for the fiscal first half. The yen has fallen about 22 percent against the dollar since mid-November last year, when Abe kicked off his election campaign with a platform of reflation.

Hitachi, a Tokyo-based maker of electronic equipment and machinery, saw its net income rise to almost 33 billion yen in the first half. Chairman Takashi Kawamura said increasing base salaries at next year’s spring wage negotiations was one option that he wanted to discuss at the Oct. 17 gathering, according to the Kyodo news agency.

Executives “are not oblivious to the fact they hold the key,” Kathy Matsui, the chief Japan strategist for Goldman Sachs Group Inc. whom Abe has cited for her work on “womenomics,” said in an interview last week. “They know that if they don’t raise wages and real incomes don’t grow, that could seriously hurt Abenomics.”

Japan’s jobless rate held at 4 percent in October, and the number of positions on offer for every 100 people seeking work rose to 98, the highest level since 2007 ― a sign of tightening in the job market that could put upward pressure on wages. Even so, regular wages excluding overtime and bonuses fell 0.4 percent in October from a year earlier, a 17th straight monthly decline, the Labor Ministry said on Dec. 3.

Rising living costs are starting to erode household spending power, with the consumer price index gaining 1.1 percent in October from a year before. Stripping out energy and fresh food, the gauge rose 0.3 percent, the most since 1998. The main index has been propelled by surging energy costs, a result of a sinking yen that makes imported petroleum more costly. Japan is depending more on fossil-fuel imports since nuclear reactors were shut down after the 2011 Fukushima meltdowns.

“Japan is showing signs of escaping from its 15 years of deflation, although we are still part-way along in that process,” Abe said. “We have been calling on employers to raise salaries from April,” he said. He cited one sign of progress being an average 53,000 yen increase in winter bonuses, according to a Japanese Trade Union Confederation survey.

Boosting the ranks of workers also would contribute to domestic demand, and Abe has made lifting the participation of women in the economy part of his program to shake the nation out of two decades of stagnation. Goldman’s Matsui has estimated that increasing female employment to match that of males would mean 8 million more people in the job market and a boost to GDP of as much as 14 percent.

“The active contributions of women are a pillar of our growth strategy ― Japan isn’t making the most of the abilities of its women,” Abe said in the interview. “We’ll plan more child care facilities so women can work even while caring for children.”

The participation rate for women in Japan’s labor force was at 47.7 percent in 2012, the second lowest among Group of Seven economies, and below 69.8 percent for men, according to the U.S. Bureau of Labor Statistics. (Bloomberg)