It's no longer just about catching up with inflation! The Japan Automobile Union strives to raise wages further or set the tone for the 2027 Spring Festival

The Zhitong Finance App learned that Japan's largest automobile trade union organization is seeking to surpass the goal of simply requiring wage increases to keep up with inflation in next year's labor negotiations. The head of the organization said that in order to help Japan ensure that it has enough skilled workers and meet the competitive challenges brought by China, stronger wage growth is needed. Akihiro Kaneko, president of the Japan Automobile Federation (JAW), said in an interview on Monday: “We are discussing setting higher standards than in previous years in the 2027 spring salary negotiations.”

Akihiro Kaneko said that in recent years, JAW has achieved the strongest wage increase in decades, but the organization believes that if annual wage increases mainly focus on protecting workers from rising living costs, it is not enough to reverse decades of wage stagnation. Instead, he believes that wages should increasingly reflect increased productivity and value created by workers, thereby helping Japan narrow the gap with overseas competitors.

Akihiro Kaneko said that due to the rapid rise of Chinese automakers, especially in the field of electric vehicles, the Japanese automobile industry is facing an increasingly severe operating environment. However, he pointed out that Japan should not compete with China in a cost competition that is bound to be difficult to win, but should focus on developing products with higher added value by investing in talent.

JAW has 12 trade unions representing a total of 780,000 workers, including employees of Toyota Motor Corporation (TM.US), Honda Motor (HMC.US), and employees of auto parts manufacturers. In this year's labor negotiations, member trade unions under JAW secured an average monthly wage increase of 4.81%, including a 3.58% increase in basic wages. In contrast, the overall salary increase was 4.94% a year ago, of which the basic wage also increased by 3.58%.

Last year, Japan's core consumer inflation averaged 3.1%. Japan's core inflation rate remained below the Bank of Japan's 2% target for most of this year, but it rose to 2.1% in September, surpassing this target for the first time in nine months.

The Japanese automobile industry generally determines the overall tone of national wage negotiations. The industry is widely involved in the employment of approximately 5.5 million people, and Japan's annual salary negotiations (Haruto) are usually in full swing in the first few months of each year. Japan's largest trade union organization, the Japan Federation of Trade Unions (Rengo), announced a more active labor negotiation policy for next year (JAW is also a member of this organization) last week. The new policy has a salary increase of around 6% as the core goal, while maintaining a minimum benchmark of at least 5%.

Against the backdrop of increasing inflationary pressure, if annual wage negotiations, represented by the Japanese automobile industry, require a higher salary increase next year, it may raise concerns about the “wage-inflation” spiral and push the Bank of Japan to tighten monetary policy at a faster pace.

The central obstacle to the Bank of Japan's interest rate hike has never been inflation readings, but the sustainability of inflation. Since taking office, Kazuo Ueda has repeatedly clarified a framework: the 2% inflation target must be endogenous inflation supported by a “virtuous wage and price cycle,” not cost inflation driven simply by rising prices for imported energy and raw materials. Therefore, Chun Dou plays the role of “firing gun”: a strong Chun Dou result may not immediately trigger interest rate hikes, but it is a necessary prerequisite for interest rate hikes; conversely, if the Chundou results are weak or actual wages continue to be negative, even if inflation exceeds 2%, the central bank will take precautions — because it fears that interest rate hikes will kill a virtuous cycle that has not yet formed.