Japanese companies have significantly increased salaries for the third consecutive year, supporting the Central Bank to continue raising interest rates

On March 12, Jinshi data reported that many of Japan’s largest companies have met the union’s significant wage increase demands for the third consecutive year to help workers cope with inflation and retain employees in the labor shortage situation. As the annual ‘spring struggle’ negotiations concluded on Wednesday, the electronics conglomerate Hitachi announced that it had agreed to a 6.2% monthly wage increase as requested by the union, marking a historic high. Toyota, on the other hand, stated that the wage increase for manufacturing sector employees would be on par with the highest level since 1999. Economists predict that the average wage increase for Japanese companies in 2025 will be similar to last year’s 5.1%, the highest in 33 years, allowing the Central Bank of Japan to exit the ultra-loose monetary policy that has been in place for a decade. Japan’s largest labor union umbrella organization, Rengo, is set to release a preliminary report on protocol terms on March 14. The union is requesting an average wage increase of 6.09%, higher than last year’s 5.85%. Mizuho economist Naoki Hattori said that an average increase of 5% to 5.5% would support the expectation of raising interest rates roughly every six months, with the next rate hike expected in June. However, if the increase approaches 6%, a rate hike could be seen in May.