Japan major firms offer large pay hikes amid inflation, labor crunch

Prime Minister Shigeru Ishiba's government has been paying close attention to the results of annual wage negotiations between management and labor unions, viewing them as key to increasing consumer spending and facilitating economic growth.

With the move by big firms, attention is shifting to whether the strong push for salary gains, beginning two years ago, will extend to small and medium-sized companies, which employ around 70 percent of the country's workforce.

Market players are also closely monitoring the "shunto" spring wage talks, with expectations of robust rises fueling growing speculation that the Bank of Japan will further raise interest rates.

"We are seeing joint efforts by the public and private sectors bearing fruit," Ishiba told a meeting attended by leaders of major business groups, referring to strong pay hikes announced so far by many firms.

"The government will deploy all available measures to support wage hikes by small and midsize companies," he said, as more support is deemed necessary to allow them to reflect more labor costs in their pricing and boost productivity.

Seen as a trendsetter in wage negotiations, Toyota, the world's largest carmaker by volume, fully met its union's request on a total resource basis. The firm's union demanded wage hikes of up to 24,450 yen ($165) per month, depending on the worker.

Computer maker NEC Corp. proposed a monthly base pay increase of 17,000 yen as requested by its union. Among heavy machinery manufacturers, Mitsubishi Heavy Industries Ltd., Kawasaki Heavy Industries Ltd. and IHI Corp. followed suit in matching their unions' demands.

The strong results reflected Japan's severe labor crunch, which prompted companies to raise salaries to retain workers and attract talent.

The annual wage talks at major companies typically begin in mid-February and conclude by mid-March. But this year, several firms, including auto parts makers Denso Corp. and Aisin Corp., had already fully met their labor unions' requests before Wednesday.

A preliminary tally by the Japanese Trade Union Confederation, the country's biggest labor union umbrella organization, known as Rengo, as of March 3 showed that its member unions had demanded an average pay rise of 6.09 percent, exceeding 6 percent for the first time since 1993.

Many major firms have the resources to boost wages, supported by anticipated strong earnings for the current fiscal year through March.

The combined net profit of major companies is expected to reach 52.65 trillion yen for fiscal 2024, marking a record for the fourth straight year, according to data from SMBC Nikko Securities Inc.