MNI POLICY: BOJ Sees Steady Wage Hikes Despite Tariff Concerns
MNI (TOKYO) - The Bank of Japan sees little impact of U.S. tariffs on the country’s automakers and their ability to deliver hefty wage hikes this year, which will support its rate-hike plans, but the extra duties could hurt company profits and undermine further pay increases in 2026, MNI understands.
U.S. President Donald Trump has threatened to slap 25% duties on all imported cars from April 2, up from 2.5% – a move that if implemented would significantly hurt Japan’s auto industry and undermine wage hikes next year. Japan’s car companies, particularly Toyota, tend to set the standard for wage increases across the economy.
Despite the ongoing global trade concerns, major manufacturers are expected to deliver solid wage hikes this year as they struggle to secure labour. (See MNI POLICY: BOJ Fails To Reach Inflation, Wages Agreement)
The Japanese Trade Union Confederation Rengo last week noted the average wage increase requested by its affiliated unions in the 2025 spring labour-management negotiations was 6.09%, compared to 5.85% the previous year, exceeding 6% for the first time since 1993.
STRONGER WAGES
The pay demand is likely within the Bank’s range of expectations and increases the chance for steady wage hikes throughout fiscal 2025, which will hopefully fuel a healthy wage-price cycle that the BOJ is counting on to support further rate hikes. (See MNI POLICY: Faster BOJ Hikes Hinge On Underlying View)
Rengo will publish the first wage-hike survey for the year on Friday, which the BOJ will use to forecast retail price rises that businesses typically implement in or after April each year. While wage hikes are key to achieving the Bank’s 2% target, officials also want to see the increases translate into higher retail prices.
The confederation will also gradually incorporate smaller-firm wage hikes into the survey and periodically update the results, while the government’s wage data will offer a more detailed picture in or after June.
BOJ officials are also concerned that worsening consumer sentiment found in recent government survey data will lead to a fall in spending, which in turn will make it difficult for businesses to raise prices smoothly.