Japanese firms agree to biggest pay hike in 34 years

TOKYO – Japanese firms agreed to raise wages by more than 5 per cent on average in 2025, on course for their most substantial pay hike in over three decades – a relief for many workers, though it is unclear if the increases will lead to a meaningful jump in consumer spending.

As annual labour negotiations wrapped up this week, many of Japan’s biggest firms said they met union demands in full.

Some, such as electronics conglomerate Hitachi, delivered record pay increases, though a few sectors were left out of the cold, and it remains to be seen how workers at many smaller firms will fare.

Hefty pay hikes have been seen as essential to counter inflation-induced sharp increases in the cost of living. Many firms, emboldened by record profits on the back of a weak yen, are also keen to retain staff amid labour shortages.

More broadly, policymakers have long urged Japan Inc to lift pay so that ordinary citizens might break out of a mindset conditioned by decades of deflation that has made them reluctant to spend with confidence.

The 5.46 per cent preliminary reading from Japan’s largest federation of trade unions, Rengo – a seven million member-strong group – represents the third year in a row of substantive increases for base pay and is likely to mark the highest increase in 34 years.

The number compares with the 2024 preliminary reading of 5.28 per cent, which was then revised down over several stages to 5.1 per cent.

Final tallies are usually lower than preliminary figures, as most agreements between smaller firms and their unions are factored in later.

Economists have not been overly optimistic that even substantial wage growth will be enough to spur consumers to loosen their purse strings.

Headline consumer inflation, including fresh food prices,