Pay hikes at Japan Inc set stage for rate rise

STORY: Toyota has agreed to give its factory workers their biggest pay rise in 25 years.

And other big names in Japanese business are making similar decisions.

Panasonic, Nissan and Nippon Steel are among those in a giving mood.

The news came as annual wage negotiations wrapped up on Wednesday.

That process has long been seen as a defining feature of the collaborative relationship between management and labor in Japan.

But this year the talks are even more closely watched than usual.

That’s because the Bank of Japan has made big pay increases a prerequisite for getting out of negative interest rates.

Bank governor Kazuo Ueda has said he wants to see signs that wage hikes will help end Japan’s long battle with deflation and spur consumer spending.

Now the new figures have economists betting the bank could even make a move at next week’s policy meeting.

Toyota is often seen as a bellwether for wages, but this year there are other positive signs.

One metals and machinery union said its members were getting better-than-expected rises at small firms.

That’s critical, since smaller companies employ seven out of ten workers in Japan.

Union grouping Rengo says overall hikes could exceed 5% for the first time in 31 years.

Economists see domestic labor shortages and inflation as among the drivers.