Japan's Largest Union Demands "5.28% Wage Increase"... Base Interest Rate May Rise

Midterm Tally at 5.28%... 5% Range for the First Time in 33 Years
Possible Interest Rate Hike as Early as This Month

[Image source=Yonhap News]

Japan's largest labor union organization, Rengo (Japanese Trade Union Confederation), announced that the average wage increase rate has reached the 5% range through the spring wage negotiations known as "Chuntu." With both prices and wages rising, Japan's benchmark interest rate is also expected to increase.

According to foreign media including Nihon Keizai Shimbun and Asahi Shimbun on the 15th, Rengo revealed that the mid-term tally of the average wage increase rate, which includes base salary increases plus regular promotions, was 5.28%. This is 1.48 percentage points higher than the same period last year. This figure is based on wage increase results from 771 affiliated unions. The wage increase rate for small and medium-sized enterprises with fewer than 300 union members was 4.42%.

If the increase rate remains in the 5% range in the final tally scheduled for July, it will mark the first time in 33 years since 1991 (5.66%) that the rate has reached the 5% range. Earlier, unions under Rengo demanded an average wage increase rate of 5.85%, the highest level in 30 years, during this year's Chuntu negotiations.

This is interpreted as a result of the Japanese government's efforts to encourage companies to raise prices in order to escape deflation (price declines amid economic stagnation). Toyota Motor Corporation fully accepted the union's demand for the largest wage increase in 25 years since 1999. Nippon Steel also set the base salary increase at 35,000 yen per month (approximately 313,160 KRW), which is higher than the union's requested amount.

With Rengo announcing such a high level of wage increases, the Bank of Japan, Japan's central bank, is expected to raise interest rates for the first time in 17 years. This is because the Bank of Japan has met both conditions for changing its negative interest rate policy: "rising prices and wages." Last year, Japan's consumer price index (excluding fresh food) rose by 3.1%, marking the highest level since 1982.

The market expects the Bank of Japan to raise interest rates at the monetary policy meeting this month or next month. Asahi Shimbun reported, "There are increasing expectations that interest rates will be raised this month due to the high wage increase rate from Chuntu," and added, "Voices within the Japanese government are also calling for accepting a policy shift in March."

This content was produced with the assistance of AI translation services.