Chiefs of Japanese major business lobbies on Friday vowed to push for larger pay hikes than last year after Prime Minister Fumio Kishida called on them to increase wages so that they outpace rising prices at a New Year's event.

"We will tackle the issue of wage increases with stronger passion and resolve than last year," Masakazu Tokura, chairman of the Japan Business Federation, also known as Keidanren, said at the event, adding, "Japan is now faced with a once-in-a-lifetime chance to get out of deflation completely."

The remarks came as Japan's major companies raised their wages by 3.99 percent on average last year, the biggest increase in 31 years. Tokura said he hopes to see better results in this year's spring wage negotiations.

Takeshi Niinami (L), chairman of the Japan Association of Cooperate Executives, Masakazu Tokura (C), chairman of the Japan Business Federation known as Keidanren, and Ken Kobayashi, chairman of the Japan Chamber of Commerce and Industry pose for a photograph after a New Year meeting hosted by Japan's three major business organizations in Tokyo on Jan. 5, 2024. (Kyodo)

Speaking at the event held by the business lobbies and attended by a host of top executives from the country's leading companies, Kishida stressed that an increase in disposable income is vital in realizing a virtuous cycle of wage increases and economic growth.

"I will take every possible step to ensure the current positive trend continues," Kishida said. "This year is going to be a very important year. I ask for your cooperation to realize powerful wage hikes."

Takeshi Niinami, chairman of the Japan Association of Corporate Executives, told a press conference that major companies need to raise wages by more than 5 percent to ensure the positive effect trickles down to smaller firms.

"We need to make increasing wages a social norm," Niinami said, adding, "This year is going to be the litmus test to see if wages continue to rise."

Meanwhile, Tomoko Yoshino, head of Rengo, or the Japanese Trade Union Confederation, reiterated its policy of demanding an over 5 percent wage increase and vowed to build momentum for larger pay hikes than last year at a separate press conference.

Boosting wages is also important to the Bank of Japan, which is closely watching the course of spring wage negotiations this year to determine whether it should end its negative interest rate policy.

Tokura expressed the view that a price increase of about 2 percent is necessary for sustainable wage growth and demanded the BOJ and the government implement "financial and fiscal policies that allow prices to grow moderately."

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