Toyota and Honda agreed to the biggest wage hikes in decades in an early sign of momentum in annual pay negotiations as the Japanese central bank looks for evidence of a wage-price cycle that could lead to policy change.
Toyota agreed to give the largest wage raise in two decades according to its union Wednesday. The world’s biggest automaker said the agreement was reached at the first round of negotiations. It did not disclose a percentage increase.
Later in the day, Honda said it will raise wages by 5 percent, including the biggest increase in base pay in about 30 years.
The early moves by the big companies serve as the latest signal of an upward move in the wage trend as the highest inflation in more than four decades eats into the purchasing power of households.
Big pay raises from some of the biggest names in corporate Japan at an early stage could also put pressure on other companies to give larger-than-usual increases.
Wages have taken center stage in the country as the Bank of Japan has indicated it must see stronger growth in pay to ensure that the trend in prices is sustainable. The BOJ has a 2 percent inflation target, but even with key prices rising at 4 percent, the central bank remains committed to its massive stimulus program until wages also show larger gains.
The bank has said 3 percent wage growth is necessary to support stable inflation of 2 percent.
Toyota said it agreed to increase pay including base wages and bonuses, adding that this was the third consecutive year it met union demands in full.
Toyota is often first among Japanese companies to announce the results of annual wage negotiations.
In recent years the labor union has requested wage increases across 12 categories based on type and rank, as opposed to an average increase of base pay in the form of a percentage.
The company said bonuses this year would be equal to 6.7 month’s salary.
Honda said the raises would add up to a 19,000 yen ($141) bump in monthly pay.
The automaker also said the salary hikes will prioritize younger employees who are more impacted by inflation.
