Toyota agrees to biggest wage hike in 25 years, paves way for BOJ shift
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[March 13, 2024] By
Tetsushi Kajimoto and Anton Bridge
TOKYO (Reuters) -Toyota Motor agreed to give factory workers their
biggest pay increase in 25 years on Wednesday, heightening expectations
that bumper pay raises will give the central bank leeway to make a key
policy shift next week.
Toyota, Panasonic, Nippon Steel and Nissan were among some of Japan
Inc's biggest names that agreed to fully meet union demands for pay
hikes at annual wage negotiations that wrap on Wednesday.
The talks, long a defining feature of the usually collaborative
relationship between Japanese management and labor, are being closely
watched this year as the pay increases are expected to help clear the
way for the central bank to end its years-long policy of negative
interest rates as early as next week.
Toyota, the world's biggest carmaker and traditionally a bellwether of
the annual talks, said it agreed to the demands of monthly pay increases
of as much as 28,440 yen ($193) and record bonus payments. Keeping with
past practice, the company did not provide a percentage figure for the
salary rise.
"We're seeing strong momentum for wage hikes," Japan's top government
spokesperson and chief cabinet secretary, Yoshimasa Hayashi, told
reporters. "It's important that the strong wage hike momentum will
spread to small and mid-sized firms."
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Prime Minister Fumio Kishida has made putting an end to the years of
meager wage growth a top priority to jumpstart feeble consumer spending.
Japan's wage increases have kept well behind the average for the OECD
grouping of rich countries.
The Bank of Japan is also closely watching the results as a key data
point in deciding when to end negative rates, in place since 2016.
The bank, which has stuck with massive stimulus and ultra-low rates for
years longer than other developed countries in an attempt to revive a
moribund economy, is set to hold its next policy setting meeting on
March 18-19.
"The outcome of this year's annual wage negotiation is critical" in
deciding the timing of an exit from massive stimulus, governor Kazuo
Ueda told parliament on Wednesday.
Workers at major firms have asked for annual increases of 5.85%,
according to Japan's biggest trade union grouping, Rengo, which if
agreed upon would breach the 5% level for the first time in 31 years.
Hisashi Yamada, a senior economist at Japan Research Institute and an
expert on labor issues, estimated overall increases of 4.2% to 4.3%
based on the "quite strong" responses so far, and possibly more than 5%
for top firms.
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![](../images/031324PIX/busine81.jpg)
Workers install the fuel cell power system in a Toyota Mirai at a
Toyota Motor Corp. factory in Toyota in Aichi Prefecture, Japan,
Apriil 11, 2019. Picture taken on April 11, 2019. REUTERS/Joe
White/File Photo
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He attributed the rises to the trend of higher wages globally,
domestic labour shortages and inflation.
"Still, the sustainability of such strong pay raises and whether the
trend of wage hikes will spread to small and medium-sized companies
going forward is uncertain," Yamada said.
TRICKLE-DOWN EFFECT
In a further positive sign, the Japanese Association of Metal,
Machinery and Manufacturing Workers (JAM), a union representing
workers at small manufacturers, said the pay rises secured for
members exceeded expectations and there was a change in workers'
mindset.
"The Japanese are finally starting to realize that the gap between
wages inside and outside the country is widening significantly," JAM
Chairman Katahiro Yasukochi told reporters.
Smaller firms employ seven out of 10 workers in Japan but have
struggled to offer sizeable pay hikes because they have less
leverage to pass on costs to clients.
Akihiro Kaneko, chair of the Japan Council of Metalworkers' Unions,
echoed Yasukochi's sentiment, saying he was hopeful that this year's
results could lead to a virtuous cycle of higher wages and
inflation.
Top companies such as Toyota are under pressure from the government
to facilitate wage hikes downstream so that real wages, which are
adjusted for inflation, can reverse a 22-month streak of consecutive
falls.
"We do hope that our results could spread to all of our suppliers,"
Toyota's chief human resources officer, Takanori Azuma, told
reporters.
"We need to continue asking tier-one suppliers to pass that down to
tier-two suppliers and so on," he said, while adding that
ultimately, wage decisions were up to each individual company.
(Reporting by Tetsushi Kajimoto, Daniel Leussink, Maki Shiraki, Sam
Nussey, Anton Bridge, Satoshi Sugiyama and Leika Kihara; Editing by
David Dolan, Chang-Ran Kim, Sam Holmes and Shri Navaratnam)
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