Toyota accepts union demands for the biggest pay rise in two decades

TOKYO (Reuters) – Toyota Motor Corp (7203.T), the world’s largest automaker, said on Wednesday it would accept the union’s request for the biggest base salary increase in 20 years and an increase in bonus payments, as Japan steps in. Calls up to companies to raise wages.

As one of the largest employers in Japan, Toyota has long served as a pioneer for the spring workers’ talks, which are in full swing at major companies. Many are expected to conclude quickly as the government seeks to raise wages in a way that beats inflation to ease the burden on consumers.

Koji Sato, the automaker’s incoming president, said the decision to fully accept the union’s demands in the first round of talks was not only for Toyota, but “also for the industry as a whole, and in the hope that it will lead to frank discussions between labor and management at each company.”

Within hours of Toyota’s announcement, rival Honda Motor Co Ltd (7267.T) said it had agreed to union demands for a 5% wage increase. Honda’s average monthly base salary increase of 12,500 yen ($92.70) is the biggest jump since at least 1990.

Toyota and the union representing the 357,000 Toyota Group workers said the increase in basic wages was the largest in two decades, though they declined to provide the percentage of the increase.

With inflation around 4% — the highest level in 40 years after decades of deflation — Japan is under more pressure than ever to raise wages to revive consumption.

But with the economy struggling — it avoided a recession in the fourth quarter but grew far less than expected — analysts say wage increases will remain limited to large companies, such as Toyota.

They say small and medium-sized businesses, which employ most Japanese workers, will struggle to afford wage increases.

Toyota said the wage increase would also apply to part-time workers and senior contract workers, and agreed to the union’s request for a one-time bonus payment of 6.7 months’ worth of wages.

Takaaki Sakagami, deputy general secretary of the All Toyota Federation of Trade Unions, said the union was pleased to have been able to reach an agreement with the company so quickly.

The wage agreement comes as Prime Minister Fumio Kishida stepped up calls for business leaders to speed up wage increases, warning of a return to stagflation if wage increases fall short of rapid price increases.

“We will boost consumption and expand domestic demand by strengthening efforts toward structural wage increases,” Kishida told the House Budget Committee session on Wednesday.

Fast Retailing Co Ltd (9983.T), which owns apparel giant Uniqlo, said last month it would raise wages by up to 40%, fueling expectations that major manufacturers will offer more in annual wage talks with unions this spring.

Video game maker Nintendo Co Ltd (7974.T) said earlier this month that it plans to raise basic wage for workers by 10%, despite trimming its full-year profit forecast.

($1 = 134.8500 yen)

(Reporting by Maki Shiraki and Emi Yamamitsu); Editing by Chang-Ran Kim, Bradley Perrett, and Jamie Fried

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