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(Bloomberg) -- Japanese workers demanded the largest wage hike since 1993 in ongoing pay negotiations, signaling the kind of sustainable wage growth that could help drive economic progress that both the central bank and the government are seeking.
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The Japanese Trade Union Confederation, known as Rengo, said Thursday its member unions demanded an average wage increase of 6.09% this year, up from last year’s 5.85%, and seeking more than 6% for the first time in more than three decades. Unions representing workers from smaller companies demanded a 6.57% raise, jumping from 5.97% last year. Rengo represents roughly 6.8 million workers employed across the nation’s industries.
The yen strengthened to as much as 148.07 to the US dollar, after trading around 148.80 shortly before the release.
Stronger demands from the union side reinforce the push for higher wages, signaling that the results of the negotiations set for later this month may be stronger than expected. Sustained pay growth is a crucial component for generating the kind of demand-led virtuous economic cycle sought by the government and the Bank of Japan.
“Workers went for a much higher number, knowing that firms are thinking about hiking wages to retain employees,” said Keiji Kanda, senior economist at Daiwa Institute of Research. “Given accelerating inflation over the last few months, workers are also likely seeking compensation.”
Last year the central bank raised interest rates for the first time in 17 years in March, a matter of days after Rengo released the initial results of pay deals. The first tally showed that about 770 unions, mainly representing large companies, achieved an average pay hike of 5.28%, the biggest jump in 33 years.
This year, Rengo will announce the first tally of deals on March 14, five days before the BOJ’s next policy decision, mirroring last year’s timeline. The central bank’s Deputy Governor Shinichi Uchida signaled this week that the benchmark interest rate remains on a gradual upward path.
Most BOJ watchers expect the bank to hold off on another rate hike until summer, after raising rates to 0.5% in January. Still, stronger-than-expected wage settlements could bring forward the timing, with some analysts eyeing the April/May meeting as a potential window.