Toyota agreed on Wednesday to raise wages for factory workers, with the largest increase in 25 years, further enhancing expectations that the outcome of this year's annual wage negotiations in various industries in Japan will open the door for the Bank of Japan to make a crucial monetary policy shift next week.
Toyota, Panasonic, Nissan, and some other large Japanese companies have stated that they have agreed to fully meet the union's salary increase demands in the annual salary negotiations that end on Wednesday.
Toyota is the world's largest automobile manufacturer and has always been a barometer of Japan's "spring battle" negotiations. According to the company, it will fully accept the union's demands for salary and bonus increases for the fourth consecutive year. According to different positions, Toyota employees will receive a maximum monthly salary increase of 28440 yen (approximately 189.57 US dollars), and bonuses will increase from the previous year's equivalent of 6.7 months of salary to the level of 7.6 months of salary.
As usual, the company did not provide specific percentage figures for salary increases.
In Japan, the automotive industry, including component suppliers, dealers, and repair companies, employs approximately 5.5 million people. Therefore, the outcome of Toyota's salary negotiations this time may have an impact on the entire Japanese economy.
Steel manufacturer Nippon Steel also stated on Wednesday that it has fully agreed to the union's salary increase request, including a regular salary increase, with a total increase of 14.2%.
The Japan Metal Workers Union Federation announced on Wednesday that in this year's salary negotiations, its subordinate unions have secured an average salary increase of 14877 yen from companies, the highest level since 2014, far higher than last year's salary increase of 8407 yen. The Japan Metal Workers Union Federation is a federation of manufacturing unions in the automotive, metal, electronics, and other industries, with over 2 million members.
Honda and Mazda also announced last month that they will increase their salaries even more than in previous years - Honda agreed to a 5.6% salary increase, while Mazda will increase their salaries by 6.8%.
Rengo, the largest national union federation in Japan, will announce the preliminary annual salary negotiations reached between employers and labor representatives on Friday. Rengo previously stated that workers in large enterprises are demanding an annual salary growth rate of 5.85% - the first time in 30 years that it has exceeded the 5% mark. Therefore, some analysts predict that Japan's salary growth this year will increase from slightly below 4% to 5% or higher, which will be the largest increase in about 31 years.
Japanese Chief Cabinet Secretary Lin Fang also stated at a regular press conference on Wednesday that strong wage growth was seen in this year's spring negotiations between businesses and unions, and it is important to expand wage growth to small and medium-sized companies.
Is everything ready for Japan's interest rate hike?
The annual "spring battle" has long been a stage of competition between Japanese labor and management, and this year's negotiations have been closely monitored as it is expected that a significant salary increase will help clear the way for the Bank of Japan to end its several year long negative interest rate policy as early as next week.
Many economists have previously stated that a significant increase in wages is a prerequisite for the Bank of Japan to achieve its long-term 2% price target and end its negative interest rate policy since 2016.
The Bank of Japan has been adhering to large-scale stimulus policies and ultra-low interest rate policies for many years, attempting to revive the struggling economy. Its next monetary policy meeting will be held from March 18th to 19th.
Bank of Japan Governor Uchida and Naoyuki are closely monitoring the results of the "spring battle" as he and his central bank board members are deciding whether their long-term pursuit of a 2% sustainable inflation target has already emerged. They hope to see a virtuous cycle that links wage increases with demand driven price increases.
Mari Iwashita, chief market economist of Daiwa Securities Co., said, "President Eda once said that the spring salary negotiation is a key event. If the final result exceeds last year's salary increase of 3.8%, I think the Bank of Japan should end negative interest rates."
It is worth mentioning that in the past week, speculation has sprung up in the market that the Bank of Japan is expected to raise interest rates early, and the volatile overnight swap index is more inclined to raise rates in March than April.
It is expected that market volatility may continue before and after the Bank of Japan moves towards policy normalization. If there is indeed a reversal of ultra loose monetary policy, the recent historic high in the Japanese stock market may be impacted along with local bonds.
On Wednesday, with the release of the results of the "Spring Battle", Japanese stocks once again faced pressure. As of the close, the Nikkei 225 index fell 0.26%.