Japan's largest union, Rengo, will ask for a pay increase of at least 5% at next year's spring wage negotiations to help workers overcome rising living costs in the face of inflation, Reuters reports, citing a union representative. Japanese firms are under pressure from Prime Minister Fumio Kishida's demands for pay rises to outpace inflation, currently running at 2.9%. Price-adjusted real wages have fallen for 18 months in a row, squeezing real incomes.

"This year's labour talks broke through Japan's negative structure to make us believe that wages will rise, bringing us to a turning point," Rengo President Tomoko Yoshino said. "To raise wages with everyone, wages must rise at small firms that account for 99.7% of firms and 70% of companies, respectively."

In Japan, wages on average had hardly grown in the past 30 years. In 2023, however, big firms struck a deal with unions that resulted in the biggest pay rises, 3.58%, in three decades. The move by Rengo follows similar demands by other unions, laying the groundwork for the Bank of Japan to shift away from more than a decade of monetary stimulus. JCM, which represents 2 million metal workers, said it was considering asking for a monthly base pay increase of at least 3% at wage talks. UA Zensen, a union that covers service-sector workers and part-timers, said it would demand a 6% pay increase next year.

Meanwhile, six out of 10 economists in a Reuters poll expect major firms to increase pay in 2024.