Japanese companies raised wages by an average of 5.25% in 2025, according to data from the Japanese Trade Union Confederation (Rengo), marking the largest annual increase in 34 years. The figure was compiled from wage agreements across 5,162 companies during the country’s annual shuntō spring labor negotiations.
The 2025 negotiations saw active participation from major firms in industries such as manufacturing, retail, and transportation. Several large companies implemented above-average base pay increases along with bonus adjustments. For small and medium-sized enterprises (SMEs), Rengo reported an average wage increase of 5.01%, the first time that SME gains have exceeded 5% since the current tracking method began in 1992. The wage growth across both large and small firms suggests broader momentum compared to previous years.
The wage increases come against a backdrop of elevated inflation, labor shortages, and government calls for sustained income growth. Japan’s core consumer inflation has remained above the Bank of Japan’s 2% target, prompting calls for wages to keep pace with rising living costs.
Policymakers, including Prime Minister Fumio Kishida, have encouraged companies to adopt more proactive pay strategies to support consumer spending and long-term economic stability. The Bank of Japan has also emphasized the importance of wage growth in assessing future interest rate adjustments, following its first policy rate hike in 17 years earlier this year.
The 2025 wage outcome suggests increasing willingness among employers to adjust pay in line with inflation and labor market conditions. However, whether this trend continues will depend on economic performance, input costs, and the ability of smaller firms to maintain pace in a changing macro environment.
Chelsea covers business and economic news in Malaysia, providing insights on market trends, corporate developments, and financial policies. More about Chelsea Low
