Japanese companies agreed to wage hikes of more than 5% for a third year, the nation’s largest labour union group said on Friday, signalling sustained pay increases are becoming firmly entrenched to support the world’s fourth-largest economy.
The final tally of annual labour talk results showed Japanese companies have agreed to raise pay by 5.01% on average this year, the 7-million-member-strong union Rengo said.
That follows an average increase of 5.25% last year and 5.10% the year before.
The strong outcome of the labour talks, coupled with real wage growth turning positive in recent months, “should support consumer spending and reinforce the case for the Bank of Japan to stay on its gradual rate-hike path,” said Kazutaka Maeda, an economist at Meiji Yasuda Research Institute.
Analysts expect healthy corporate profits and severe labour shortages at Japanese firms to sustain wage momentum, with many forecasting pay rises of a similar magnitude next year.
Despite the energy shock and supply chain disruptions caused by the U.S.-Israeli war with Iran, business sentiment among big manufacturers climbed to an eight-year high, the Bank of Japan’s “tankan” survey showed this week.
The BOJ views sustained wage growth as a prerequisite for raising interest rates further.
When it raised its policy rate to a 31-year high of 1% last month, the central bank said moves to pass wage increases into selling prices were continuing and projected that a cycle of moderate wage and price increases reinforcing each other would be sustained.
