Annual wage negotiations have kicked off in Japan. The leaders of business and labor organizations appear to have already found common ground on the need for pay hikes for more workers.

Business and labor leaders are meeting in Tokyo on Wednesday.

Rengo, or the Japanese Trade Union Confederation, is an umbrella organization for labor unions. It counts about 7 million people nationwide as members.

Rengo President Yoshino Tomoko said "Wage hikes need to spread to all corners of the Japanese economy, including regional economies and smaller businesses. Labor and management will work hard to kickstart a virtuous cycle for wages, prices and the economy. "

Tokura Masakazu, the Chairman of Keidanren or the Japan Business Federation, says "Smaller companies in Japan hire about 70 percent of the country's workers. Non-regular employees account for nearly 40 percent. We need to raise wages for all these people to maintain the trend of higher pay."

Rengo plans to demand a raise of about 5 percent including a base pay increase. For small- and mid-sized firms, it will seek a raise of at least 6 percent.

But Keidanren says that figure is extremely high.

According to a Japanese labor ministry survey, spring wage negotiations yielded raises of over 10 percent from 1950 through 1975 during Japan's rapid economic growth.

But the pace tumbled after the country's real estate bubble burst and fell further during the prolonged deflation of the 1990s that continued for over 20 years, stagnating at around 2 percent.

In 2024, wage hikes topped 5 percent for the first time in 33 years.