TOKYO—If there is any boss who is in a position to give his workers a raise, it ought to be Yasuyuki Yoshinaga of Fuji Heavy Industries Ltd.

Propelled by a red-hot U.S. market, the maker of Subaru cars is set to post a record profit this fiscal year of about $3.5 billion, more than triple the figure three years ago.

But when asked about raises, Mr. Yoshinaga offered that he would think about it. "I'd like to pay back our employees for their hard work," he said, but "we need to be cautious about fixed costs." He added, "I'm not being stingy."

Whatever adjective one prefers, chief executives like Mr. Yoshinaga are one of the biggest challenges for Prime Minister Shinzo Abe as he faces a make-or-break year for his Abenomics growth program.

Corporate profits are strongly up, and even inflation has tiptoed into positive territory, when excluding the effects of plunging oil prices. Attracted by the weaker yen triggered by Abenomics, the number of foreign tourists visiting Japan is likely to come close to 20 million when the final figure for 2015 is announced this month, blowing away the previous record by more than 6 million.

But Mr. Abe's plan to lift Japan permanently out of its quarter-century of stagnation has always counted on more than that. He envisions a virtuous cycle, where higher profits translate into higher wages and more spending.

The wages part is where the cycle is breaking down. Government data released Friday showed that real wages fell 0.4% in November from a year earlier, ending a four-month string of modest rises.

Wage negotiations in Japan traditionally take place in February and March ahead of April 1, when the fiscal year begins for most companies. Facing elections for parliament's upper house in the summer, Mr. Abe has stepped up pressure on companies to raise wages and spend some of their nearly $2 trillion in cash.

"We're one step away from getting out of deflation," he said at a Jan. 4 news conference. "Whether we can accelerate this trend depends on how strongly we can keep pushing forward the positive cycle of wage increases and investment."

But the market turmoil in China over the past week and the U.S. Federal Reserve's move to raise interest rates have given Japanese CEOs another chance to replenish their already-ample stores of caution.

Takashi Goto, president of hotel and railway operator Seibu Holdings Inc., said there was "room for consideration" about raises, but "we also need to think about how some risk factors such as China's economic woes and the U.S. Fed's rate increase could affect our business."

Seibu's net profit is set to rise 4.8% in the current fiscal year, backed by the tourist flood which has made it tough to get a booking in Tokyo during peak periods.

Japan's top big-business group, Keidanren, is set to make its recommendations in mid-January on wages. The group's head, Sadayuki Sakakibara, said he would call on companies to raise wages beyond last year's increases, when, according to Keidanren, overall wages including one-time bonuses rose 2.5%. Under pressure from the prime minister, Mr. Sakakibara has also said he would call on companies to boost investment by ¥ 10 trillion, or about $84 billion.

"Wage increases are the big driving force to make consumer spending expand," Mr. Sakakibara said.

One of the few to respond so far is Dai-ichi Life Insurance Co., Japan's second-biggest life insurer by revenue after state-controlled Japan Post Insurance Co. It said it was planning across-the-board raises for its 40,000 sales staff, including a $170-a-month raise for new hires.

The "deflationary mindset" continues to dominate among a generation of executives who have experienced a bursting bubble at home, wide currency swings and the 2008 global financial crisis, leading them to conclude that hoarding cash for hard times is the safest strategy.

Yoshimitsu Kobayashi, chairman of Mitsubishi Chemical Holdings Corp. and head of a group of corporate executives, said the biggest risk to Japan wasn't the Chinese stock market or Mideast terrorism.

"The true risk is in the hearts of Japanese managers," he said. "Going back 10 or 20 years, people have said that we have to be agile and speedy, but I really can't see it here in Japan. You'd be hard-pressed to find much boldness."

Yoko Kubota and Atsuko Fukase in Tokyo contributed to this article.

Write to Peter Landers at peter.landers@wsj.com

(END) Dow Jones Newswires

January 10, 2016 19:45 ET (00:45 GMT)