World’s largest automaker Toyota Motor Corp has accepted a worker union demand for an increase in salary and incentive payments in full. This development comes amid calls for businesses to raise pay in Japan as the world’s third-largest economy battles inflation.
Toyota, which is one of Japan’s largest employers, has also traditionally been seen as a leading indicator of the spring labour negotiations, which are now in full swing at major corporations. These talks are anticipated to wrap up quickly as the government works to reduce consumer burdens by pursuing inflation-beating pay increases.
The 357,000-strong Toyota group employees’ union federation claimed that the base wage increase being requested was the largest in the previous 20 years, albeit it did not provide specific information on the extent of the rise.
After the initial negotiations, a settlement was reached, according to the sources.
According to the Asahi newspaper, the union also requested one-time incentive payments totalling 6.7 months of earnings, which broke the initial news of the arrangement.
According to a Toyota representative speaking to Reuters, “We are aware that the labour-management talks have concluded, but we are unable to provide information on the content of the negotiations at this moment.”
Takaaki Sakagami, deputy secretary-general of the Federation of All Toyota Workers’ Union, said the union was pleased it had been able to reach a deal with the company quickly.
The automaker’s incoming president Koji Sato said the decision to accept the union’s demands was meant not just for Toyota but “also for the industry as a whole, and in the hope that it will lead to frank discussions between labour and management at each company.”
Within hours of Toyota’s announcement, rival Honda Motor said it had agreed to union demands for a 5% pay increase. The average monthly base salary rise of 12,500 yen (USD 92.70) at Honda (HMC) is the biggest jump since at least 1990.
With inflation running at around 4%, the highest level in 40 years following decades of deflation, Japan is under more pressure than ever before to raise wages to revive consumption.
It has averted recession in the fourth quarter but grew much less than expected; analysts quoted by Reuters said that pay increases would remain limited to big firms, as small and medium-sized companies will struggle to afford such moves.
The anticipated compensation deal comes as Japan Prime Minister Fumio Kishida intensified pressure on company executives to speed up wage hikes, threatening a return to stagflation if pay increases fall short of the sharp price increase.
At a lower house budget committee meeting, Fumio Kishida declared, “We will boost consumption and expand domestic demand by promoting efforts towards structural wage increases.”
The apparel juggernaut Uniqlo’s owner, Fast Retailing Co Ltd, announced in January 2023 that it would increase pay by up to 40%, raising hopes that large manufacturers would make a more extensive offer during annual wage negotiations with unions this spring.
Nintendo Co Ltd, a creator of video games, announced in February that it would increase base compensation for employees by 10% while lowering its full-year profit prediction.