Japan’s workers are set for 5.28% hike in wages after ‘shunto’ negotiations, largest union group says

Japan’s largest trade union, Rengo, said Friday that workers at the country’s biggest firms are set for the sharpest wage spike in more than three decades, setting the stage for the central bank to exit the world’s last negative rates regime.

Rengo said its seven million members are poised to receive about 5.28% in salary increments in fiscal year 2024, according to the first of its several provisional updates for this year’s negotiations.

The world’s largest automaker Toyota on Wednesday agreed to the biggest annual pay increase for workers in 25 years.

Market speculation reached a fever pitch this week as various corporate giants announced robust salary increments, in some instances exceeding the unions’ demands.

There are expectations the Bank of Japan may hike rates for the first time since 2007 at its policy meeting next week, exiting negative rates.

Bank of Japan Governor Kazuo Ueda has repeatedly said the outcome of this year’s wage negotiations will influence the central bank’s decision on when to exit the world’s last negative interest rate policy.

Even though “core core inflation” — which excludes food and energy prices — has exceeded its 2% target for more than a year, the BOJ has barely budged from its current ultra-accommodative monetary policy posture that has been in place since 2016.

The BOJ’s thinking is that increased wages will stimulate consumer spending, lifting prices in a sustainable manner, and allowing more room for monetary tightening. 

Here’s what you need to know about this year’s spring wage talks, which takes place annually in March.

At the annual wage talks, management and unions of major companies across industries meet for negotiations to help determine employees’ pay and working…