TOKYO - Japanese firms agreed to raise wages by more than 5 per cent on average in 2025, on course for their most substantial pay hike in over three decades - a relief for many workers though it’s unclear if the increases will lead to a meaningful jump in consumer spending.
As annual labour negotiations wrapped up this week, many of Japan’s biggest companies said they met union demands in full.
Some, such as electronics conglomerate Hitachi, delivered record pay increases, though a few sectors were left out of the cold and it remains to be seen how workers at many smaller firms will fare.
Hefty pay hikes have been seen as essential to counter inflation-induced sharp increases in the cost of living. Many companies, emboldened by record profits on the back of a weak yen, are also keen to retain staff amid labour shortages.
More broadly, policymakers have long urged Japan Inc to lift pay so that ordinary citizens might break out of a mindset conditioned by decades of deflation that has made them reluctant to spend with confidence.
The 5.46 per cent preliminary reading from Rengo, a seven million member-strong group, represents the third year in a row of substantive increases for base pay and is likely to mark the highest increase in 34 years.
The number compares with the 2024 preliminary reading of 5.28 per cent which was then revised down over several stages to 5.1 per cent. Final tallies are usually lower than preliminary figures as most agreements between smaller companies and their unions are factored in later.
Economists have not been overly optimistic that even substantial wage growth will be enough to spur consumers to loosen their purse strings.
Headline consumer inflation, including fresh food prices, hit 4 per cent in January, its highest level in two years.
Ms Nana Nagayama, 51, who was visiting Tokyo from the northern island of Hokkaido on a graduation trip for her daughter, said her husband hasn’t mentioned any expectations of a big increase and expects money to continue to be tight.
“This trip, for example, my husband didn’t come so that we could save money,” she said.
Underlining how wage growth is a top priority, Prime Minister Shigeru Ishiba this week ordered authorities to look at ways to encourage higher pay for truckers. He also said the government would look at taking measures so that smaller firms can pass on higher costs to customers, enabling them to pay workers more.
Rengo’s member unions sought an average hike of 6.09 per cent in 2025, up from 5.85 per cent in 2024 and marking the first time in 32 years that they have asked for more than 6 per cent.
This year, Rengo has focused on achieving strong pay rises for smaller firms.
“The average increase for smaller companies was at its highest for the first time in 33 years but there’s still a big gap between pay at workers in small firms and those at larger ones. As wage talks typically continue at smaller firms in April and May, we will continue to support them,” President Tomoko Yoshino told a press conference. REUTERS
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