The head of Japan¡¯s biggest business lobby warned the impact of U.S. tariffs on the nation¡¯s industry needs to be carefully monitored, in comments signaling caution as formal wage negotiations between employers and labor unions get underway.

¡°While U.S. tariff measures may not have such a large impact from a macro perspective, we still need to watch them closely from a micro perspective,¡± Yoshinobu Tsutsui, head of Keidanren, said Tuesday at a meeting with the nation¡¯s largest trade union federation Rengo. Tsutsui emphasized the need to monitor the impact especially on smaller firms.

Still, Tsutsui said he expects businesses to maintain wage hike momentum to a certain extent during the talks despite some ¡°clearly very tough factors.¡±

The meeting marks the official start of annual wage negotiations, which are expected to culminate with agreements in March. Tsutsui didn¡¯t comment on how much in gains he expects at the end of the talks.

Sustained wage hikes are a key element supporting stable inflation, a condition the Bank of Japan seeks as it looks to further roll back the degree of easing in its monetary policy settings. BOJ Gov. Kazuo Ueda reiterated last week that authorities will continue to raise the benchmark rate if the economic and price outlook materializes.

Rengo is seeking a wage increase of at least 5%, keeping the same target as last year. Keidanren, meanwhile, suggested last week that its focus is more on base pay. Rengo achieved average gains of 5.25% in the previous round, the largest jump in three decades.

U.S. duties on imports from Japan are a newly added challenge for many Japanese companies after U.S. President Donald Trump launched his tariff campaign in the spring of 2025.

Some companies have attempted to absorb a portion of the taxes in order to protect market share, squeezing their profit margins and limiting their capacity to raise wages. After many rounds of trade talks, Washington agreed in July to fix tariffs on imports from Japan at 15%. While the rate is lower than the 25% originally threatened, it remains well above levels before Trump began his second term as president.

About one-third of companies expect lower profits in the fiscal year ending in March due to higher U.S. duties, according to a survey released in November by Teikoku Databank.

¡°On wage hikes, I believe Keidanren and Rengo are aligned in their thinking and in the direction they are taking,¡± Rengo¡¯s chair Tomoko Yoshino told reporters after the meeting. ¡°Compared with last year, our views are even closer this year,¡± she said.