Japan's largest business lobby reports pay hikes exceeding 5%

Japan Times

22-05-2025

Japan's top business lobby reported that workers at affiliated companies won pledges for pay hikes exceeding 5% for a second consecutive year, an outcome that points to continued momentum in wage increases fueled by the worsening labor crunch.
Some 620,000 workers at 97 major companies affiliated with the Japan Business Federation, or Keidanren, saw average pay raises of 5.38% as a result of this year's wage negotiations, the group reported Thursday in a preliminary tally. While slightly below last year's corresponding figure of 5.58%, the outcome was more than twice the 20-year average of approximately 2.3%.
Keidanren, which represents over 1,500 firms, is set to publish a final report covering the pay round at large companies in late July, as well as a separate survey covering smaller businesses.
The data are the latest sign of buoyant wages, reinforcing earlier findings from labor unions that pointed to a second straight year of increases that were the highest in decades. It's a rare positive development for policymakers aiming to sustain economic growth as global risks mount.
Keidanren presented the report to Prime Minister Shigeru Ishiba on Thursday during a meeting that included discussions on raising the minimum wage and improving productivity.
The survey showed that 11 of 17 industries reported stronger pay gains compared with last year. Transportation, electronics, and chemicals led the pack, while sectors like automotive and steel posted more modest increases.
A key driver behind the pay hikes is Japan's persistent labor shortage, which continues to pressure employers to boost compensation to attract and retain talent. The unemployment rate has remained below 3% for over four years, one of the lowest among developed nations. A recent Teikoku Databank survey found that over 50% of companies are facing significant shortfalls in regular staff.
Companies are also responding to workers' living costs. Data due for release Friday are expected to show that inflation has stayed at or above the Bank of Japan's 2% target for three years, with the gauge excluding fresh food seen accelerating to a two-year high of 3.4%.
With consumer prices rising faster than wages, real income remains stagnant, damping spending and stalling progress toward achieving a virtuous economic cycle.
"I hope we can move toward a situation where real wages rise alongside improvement in productivity, but the reality is that prices are still high,' Hideshi Nitta, director of Keidanren's Labor Policy Bureau said. "We want the BOJ and others to take appropriate policy steps to continue real wage growth under stable 2% inflation.'
Looking ahead, Nitta noted that wage growth is likely to remain on an upward trajectory, though much depends on broader economic developments. One key risk is the impact of U.S. tariffs on corporate profitability. The auto sector faces 25% levies on cars shipped to the U.S.. About 8% of Japan's company employees work at firms connected to the industry.