The heads of Japan's largest labor group and top business lobby met Monday to discuss the country's labor market as the annual union-management negotiations began, with both parties agreeing on the need for significant pay hikes to offset the impact of high inflation.

Tomoko Yoshino, head of the Japanese Trade Union Confederation, addresses a meeting with the top business lobby Japan Business Federation on Jan. 23, 2023, in Tokyo. (Kyodo)

Tomoko Yoshino, the head of Rengo, or the Japanese Trade Union Confederation, called for pay hikes including base salary increases to ease the pain related to the fallout from the coronavirus pandemic and recent rapid inflation. She said this year "should be a turning point to change our future" through sustained pay raises at companies of all sizes across the country.

Masakazu Tokura, the chairman of the Japan Business Federation, better known as Keidanren, agreed at the two organizations' meeting on the importance of pay increases to overcome economic challenges.

"We are calling for (corporate managers') to make aggressive responses by giving due consideration to prices and fulfilling their social responsibility of sustaining or even strengthening the momentum of wage hikes," Tokura said.

Core consumer prices in the country rose 4.0 percent in December from a year earlier, the highest level since 1981, while Japan's real wages declined for the eighth straight month in November, according to the latest available government data.

Masakazu Tokura, chairman of the Japan Business Federation, addresses a meeting with the largest labor group Japanese Trade Union Confederation on Jan. 23, 2023, in Tokyo. (Kyodo) 

Rengo has already said it will target a pay increase of around 5 percent in this year's so-called shunto spring negotiations, the highest increase demanded by the group in 28 years. It wants more than half of that increase to come from a basic pay hike with the remainder from a regular annual raise based on seniority.

According to Rengo, the average wage increase in last year's shunto was 2.07 percent, but government data have shown the country's real wages have fallen for eight months in a row through November due to workers' reduced purchasing power.

Keidanren has urged member companies to try raising basic pay, though it has said each company would need to give careful consideration about meeting Rengo's wage demands.

Prime Minister Fumio Kishida has called on business leaders to deliver wage increases to offset rapid inflation.

Economy, Trade and Industry Minister Yasutoshi Nishimura said Monday he expects companies posting good earnings to achieve a pay hike of 5 percent or more.

Labor unions of major firms are expected to submit their requests to management in mid-February, and most of them typically receive responses in mid-March.

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