Japan's largest labor union federation Rengo announced the final results of the 2024 wage negotiations on Wednesday.
Data shows that the average salary increase for its members this year reached 5.1%, the highest level since 1991. Although this result is lower than the preliminary announcement of 5.28% in March, it still reflects the strong momentum of wage growth in Japan.
Rengo has about 7 million workers, accounting for about 10% of Japan's labor force. This wage growth trend is in line with the policy goals of the Bank of Japan. The Bank of Japan hopes to stimulate consumption and achieve stable price increases by promoting wage growth.
In March of this year, shortly after Rengo released the preliminary results of wage negotiations, the Bank of Japan announced its first rate hike in 17 years, showing confidence in the economic outlook.
However, despite the strong overall salary increase, the wage growth gap between large and small businesses still exists. The wage increase for small businesses with less than 300 employees this year was 4.45%, lower than the overall level, and the gap compared to last year has widened further. Small and medium-sized enterprises account for 99.7% of the total number of enterprises in Japan, and employ 70% of the labor force in Japan. The wage increase for these enterprises is more critical to the economic outlook of Japan.
Both Prime Minister Fumio Kishida and the Bank of Japan regard the ability of small and medium-sized enterprises to raise wages as a key economic policy. In addition, although nominal wage growth in Japan is strong, in the context of sustained inflation, the timing of when real wages can turn positive, and whether the expected growth in disposable income can restore consumer confidence, are issues that need to be closely watched.