Annual 'Shunto' Negotiations Underway
Japan's annual spring wage negotiations, commonly referred to as 'Shunto,' officially began on Tuesday, January 27, 2026. The talks bring together the nation's largest labor union confederation, Rengo, and the powerful business lobby, Keidanren, to determine wage increases for the upcoming fiscal year. A central focus of this year's discussions is whether the momentum for pay hikes of 5% or higher can be sustained for a third consecutive year.
Labor and Business Stances
Rengo, led by President Tomoko Yoshino, has set an ambitious target, demanding an overall wage hike of at least 5% for the third straight year. This demand includes a base-pay rise of 3% or more, with the ultimate goal of achieving a 1% real (inflation-adjusted) wage increase to boost consumer purchasing power. Furthermore, Rengo is actively encouraging unions at small and medium-sized enterprises (SMEs), which constitute approximately 70% of Japan's workforce, to seek even higher increases of 6% or more to help narrow the existing wage gap with larger corporations.
On the business side, Keidanren Chairman Yoshinobu Tsutsui has urged member companies to maintain the strong momentum of wage increases. Following a meeting with Rengo's leadership, Tsutsui stated, 'To further solidify the strong momentum of wage increases, we will exert leadership as our social duty.' Both labor and management share the aim of achieving wage hikes that outpace inflation.
Recent Wage Trends and Economic Impact
The current negotiations follow two years of significant wage growth. In 2025, major Japanese firms achieved average wage increases of 5.39%, according to a Keidanren survey, or 5.25% as reported by Rengo, marking the largest hike in 34 years. This built upon the 2024 negotiations, where major firms saw an average increase of 5.58% (Keidanren) or 5.10% (Rengo), the first time in 33 years that the average wage increase exceeded 5%. However, despite these nominal gains, price-adjusted real wages in Japan have seen a decrease for 11 consecutive months through last November, highlighting the persistent challenge of inflation.
The outcome of the Shunto talks is of critical importance to the Bank of Japan (BOJ). The central bank is closely monitoring wage and price trends as key factors influencing its monetary policy decisions, including potential adjustments to interest rates. BOJ Governor Kazuo Ueda has expressed keen interest in the negotiation data. The Japanese government also views sustained wage hikes as essential for transitioning the economy from a prolonged period of deflation to one of dynamic growth.
Outlook for Negotiations
Wage negotiations for most large companies are anticipated to conclude by mid-March, with smaller firms typically finalizing their agreements later. The ability of companies, particularly SMEs, to absorb higher labor costs and pass them on to consumers will be a crucial determinant of the overall success of this year's Shunto in achieving broad-based wage growth and fostering a virtuous economic cycle.
5 Comments
Donatello
The BOJ's interest in these talks highlights their importance for monetary policy and ending deflation, which is a good sign for the economy. But if these hikes lead to an inflationary spiral, the benefits could quickly be outweighed by rising living costs for everyone.
Muchacho
Just passing costs to consumers, fueling more inflation. It's a vicious cycle.
Raphael
SMEs will be crushed by these demands. Expect more bankruptcies.
Donatello
This momentum is exactly what Japan needs to beat deflation. Keep it up!
Raphael
Rengo's push for higher wages, especially for SMEs, is a noble effort to address income inequality and stimulate the economy. However, simply demanding higher percentages for smaller businesses without robust support mechanisms might put undue strain on their financial viability.