Major Japanese firms, including Toyota and Panasonic, on Wednesday said they would boost employees' wages for the first time in years, heeding a call from the prime minister ahead of a sales tax rise next month.
The deal came as companies wrap up annual labor talks known as "shunto," or the "spring offensive".
The usually low-key negotiations were being closely watched to see if cash-rich firms would put more money in workers' pockets, amid worries about the tax hike slamming the brakes on growth.
Japan's auto sector was a key target, with all eyes on the world's biggest automaker Toyota which -- along with other major exporters -- has posted big profits on the back of sharply weaker yen since Prime Minister Shinzo Abe swept to power in late 2012.
On Wednesday, Toyota said it would raise employees pay by an average of 2,700 yen a month, while they would also get an average bonus worth about 6.8 months of their annual base wage -- a common pay structure in Japan.
The pay rise was less than the 4,000 yen a month demanded by Toyota's union, but it was the Camry and Corolla maker's first wage hike in six years.
The increase amounts to about a 0.8% rise over current pay levels.
Japan's No. 2 automaker Nissan also said its employees would get 3,500 yen more each month, and a bonus worth 5.6 months of regular pay.
Bonuses are usually paid out in a lump sum twice a year, but it's not guaranteed compensation.
The electronics sectors, hammered by losses in recent years, also moved with six major firms -- including Hitachi and Panasonic -- hiking wages by 2,000 yen a month, their biggest-ever increase.
Convenience store operator Lawson has agreed to its first wage rise in 12 years.
The focus would now shift from blue-chip firms to see if small and mid-sized companies, which employ the bulk of Japanese workers, would follow the lead on pay.
The seemingly small wage hikes are a major development in a country that has suffered deflation for years, meaning consumers rarely face higher prices for everyday goods.
Abe's economic growth blitz, dubbed Abenomics, is aimed at reversing falling prices and recent data suggest Tokyo is making headway in stoking lasting inflation, which would lead to higher prices.
Consumers are also getting set for a sales tax rise to 8% on April 1, up from 5%.
The hike is seen as crucial to shrinking Japan's massive national debt, but there are fears it could weigh on consumer spending and put the brakes on growth.
Abe has been calling on Japanese firms to raise salaries so workers would have more money to spend on everyday goods, a move seen as crucial to making his growth bid work.
But concerns gathered pace this week as revised growth data showed the world's third-largest economy expanded at a slower pace than initially thought last year.
On Wednesday, a key consumer confidence indicator dropped in February, with the data likely to stoke further concerns about consumers' willingness to spend.© Japan Today