Japanese firms offer biggest pay hikes in 30 years, wage growth broadens

Japanese firms offered the biggest pay hikes in three decades at this year's negotiations with workers, the country's largest trade union group said on Wednesday, a development economists say will help revive anaemic consumer demand.

A survey conducted by Rengo, Japan's umbrella trade union group, showed pay hikes first reported by unions at the largest employers in March were now broadening to workers at small and medium enterprises (SMEs), or those with unions of 300 or fewer members.

The final survey of 5,272 unions affiliated with Rengo showed an average pay hike of 3.58 per cent, or 10,560 yen per month, the biggest increase since 3.9 per cent seen in 1993. Among them, SMEs raised wages by 3.23 per cent, also the fastest pace in three decades.

Wage growth is one of the key trends the Bank of Japan (BOJ) is closely watching as it considers if and when it should unwind its ultra-loose monetary stimulus.

BOJ Governor Kazuo Ueda has repeatedly stressed the need to keep policy accommodative until wages increase enough to keep price growth sustainably around its 2 per cent target.

"Rising prices and a chronic labour crunch are driving up wages, which will continue to rise next year. What's important from now on is to bring real wages to positive territory," said Hisashi Yamada, economist and Hosei University professor.

"Rising wages will help stabilise inflation at 2 per cent towards next year, keeping the central bank under pressure to scrap yield curve control sooner or later."