Japan’s biggest labor union federation calls for 6% wage hike in 2027

Japan’s largest labor union federation will push for wage increases of around 6% in next year’s pay negotiations, seeking to build on recent gains as the government targets sustained pay rises to help drive consumer spending and boost economic growth.

Rengo plans to urge affiliated unions to demand total pay increases of at least 5% and ideally 6%, in annual wage negotiations culminating next spring, according to targets outlined in its draft policy framework Thursday. That includes base-pay increases of at least 3% and ideally 4%.

After setting a target of at least 5% last year, the federation added the 6% figure to encourage unions to push for even bigger pay increases, according to Akira Nidaira, assistant secretary-general at Rengo.

Member unions typically submit their wage demands by around February, with companies responding from March onward.

Workers affiliated with Rengo secured an average wage increase of 5.01% in negotiations earlier this year, with the gains feeding into the government’s monthly wage data through the summer. Along with easing inflationary pressures, the pay increases helped lift Japanese workers’ real wages for an eighth straight month in August, the longest streak of gains in almost a decade.

In recent years Rengo-affiliated unions have aggressively pursued pay gains during wage talks, demanding increases of more than 5.8% in each of the past three rounds of negotiations. Workers then secured raises of more than 5% in all three years — levels last seen in 1991.

Sustained wage growth is crucial to policymakers’ efforts to achieve their respective economic goals. The Bank of Japan is hoping to spur a mutually reinforcing cycle of wage and price growth as it gradually proceeds with interest rate increases toward levels not seen in decades.

Prime Minister Sanae Takaichi also emphasized wage growth in her policy speech earlier this month, saying Japan was at a crossroads in establishing a virtuous cycle of corporate investment, higher wages and stronger consumption. She stressed the need for sustained pay gains that outpace inflation.

To narrow wage disparities, Rengo maintained its call for unions at smaller companies to seek increases of at least 6%, unchanged from last year, the draft showed. Smaller businesses face mounting pressure from inflation and labor shortages, with their workers securing raises of just 4.69% on average this year against demands for 6.64%.

Separately, Rengo unveiled a medium-term goal of raising wages by 15% by 2030. Nidaira said it was important for the federation to provide a longer-term outlook for wages to support continued growth. The target assumes annual wage growth of 3% over the next four years, plus an additional 3% boost from investment policies under the Takaichi administration, he said.