Japan's largest labour union, Rengo, announced Thursday it will demand a wage hike of at least 5% in next spring's "shunto" negotiations, maintaining its 2025 target to sustain momentum against persistent inflation.
The Japanese Trade Union Confederation's policy aims for an overall pay hike of 5% or higher, which includes a base-pay rise of 3% or more. The ultimate goal is to achieve a 1% real (inflation-adjusted) wage increase, a barometer of consumer purchasing power that aligns with the government's target.
A key focus of the 2026 talks will be narrowing the pay gap between large and small firms. Rengo is encouraging unions at small and medium-sized enterprises (SMEs), which employ about 70% of Japan's workforce, to demand an even higher goal of 6% or more.
The confederation also said it will seek a minimum hourly wage of 1,300 yen ($8) or higher, a 50 yen increase from this year's demand.
This strategy builds on significant recent gains. According to Rengo's final tally for the 2025 negotiations, Japanese firms agreed to an average wage increase of 5.25%, the second consecutive year the hike exceeded 5%.
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This aggressive wage demand from Rengo keeps significant pressure on the Bank of Japan. Markets will see this as a key driver of domestic, demand-led inflation, increasing the probability of further BOJ rate hikes in 2026. This outlook is bullish for the Japanese Yen (JPY) but could be a mixed signal for the Nikkei, as investors must weigh the benefit of stronger consumer spending against the headwind of squeezed corporate profit margins and higher borrowing costs.
