Toyota Agrees To Wage Hikes, Bolsters BOJ Policy Shift View
Toyota Motor Corp. met its labor union’s demands for increases in salary and bonuses in full for the fourth straight year, in another sign that a sustainable wage-price cycle may be taking hold in Japan’s economy as the central bank considers the timing of a long-awaited interest rate hike.
(Bloomberg) -- Toyota Motor Corp. met its labor union’s demands for increases in salary and bonuses in full for the fourth straight year, in another sign that a sustainable wage-price cycle may be taking hold in Japan’s economy as the central bank considers the timing of a long-awaited interest rate hike.
The yen rose and government bond futures fell — signs traders were adding to bets on an imminent move by the Bank of Japan — after early reports that the world’s largest carmaker reached agreement with its unions on Wednesday. Although the union doesn’t disclose exact figures for the wage hike and bonus, Toyota Chief Human Resources Officer Takanori Azuma said they were at the highest ever level.
“Our profits are currently at a high level, and this is possible not just because of us but also our suppliers and dealers,” Azuma said in a briefing. “As a result, we’re working to improve in parallel the working environment for our suppliers and dealers.”
Toyota sits at the center of a network of auto manufacturers and suppliers that employs more than 5 million people across the archipelago, making it a bellwether for the economy and for the pay trend among big companies. A stronger rise than last year for Toyota adds to evidence that Japan is inching closer to the virtuous cycle of rising wages and prices that Bank of Japan Governor Kazuo Ueda has emphasized is needed for a policy shift.
The talks between the automakers and unions are part of the country’s broader annual spring wage negotiations, with Prime Minister Fumio Kishida’s government calling for wage growth that exceeds inflation. Honda Motor Co. Ltd and Mazda Motor Corp. also announced last month that they will raise wages from a year earlier. Honda agreed to increase its pay by 5.6% and Mazda will raise theirs by 6.8%.
Nissan Motor Co. met its labor union’s demand to raise compensation by 5%. “We reached the agreement to value employee’s efforts toward Nissan’s profit amid a difficult business environment,” Makoto Uchida, Nissan’s chief executive officer, said in a briefing, referring to the carmaker’s lowered sales target.
Rengo, Japan’s largest union, will announce its first tally of pay deals later this week, giving some indication of the results before the next BOJ policy meeting a few days after. The collective bargaining group is demanding an average wage increase of 5.85%, the biggest pay hike since 1993.
Although wages are increasing, they haven’t kept up until now with rising inflation that’s also weighing on spending by households and businesses. Revised growth data pulled the economy out of recession in the last three months of 2023, but the consumer spending component of that report was revised lower.
Manufacturers are facing aggressive proposals from unions this year as the nation’s chronic labor shortage gives workers leverage to demand increases that outpace price growth. Among its demands, Toyota’s union had been seeking a bonus equivalent to 7.6 months of salary last month.
Economists expect the results of negotiations between companies and unions to point to stronger wage growth than last year. That should clear the path for the BOJ to end the world’s last negative interest rate regime by April, according to a majority of economists in a Bloomberg survey.
(Updates with Nissan CEO comments.)
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