Japan¡¯s largest labor union group reported that workers under its umbrella secured an average pay increase exceeding 5% in this year¡¯s wage talks even after results from smaller firms were factored into the tally, an outcome that will keep the Bank of Japan?on track for a near-term interest rate hike.
Unions under the federation known as Rengo have so far won an average wage gain of 5.08%, according to an updated tally released Friday. While down from an initial 5.26%, the overall figure stayed above the group¡¯s 5% target for a third straight year.
The latest tally includes agreements from 2,156 firms with 300 or fewer employees, up from 552 in the initial report in March. Smaller firms tend to report wage hike agreements later than large firms, and those results have pulled down the overall average in recent years.
As of the latest tally, workers at firms with 300 or more workers were set to get 5.1% wage increases this year, while those at companies with 299 or fewer employees were poised to get a 4.84% increase.
Wage trends at smaller firms remain a key focus for the BOJ heading into its policy meeting this month. BOJ Gov. Kazuo Ueda said after the March meeting that the extent of wage gains among small and medium-sized firms will be central as it mulls timing of the next move.
Ueda added that early information pointed to broader spillovers than in past years, while stressing the need to assess upcoming Rengo reports with more complete small and medium-sized firms coverage.
Relatively firm wage growth among smaller firms would support the BOJ¡¯s path toward further rate hikes, though Middle East uncertainty is clouding the immediate outlook. Bets on a rate hike at the April 27-28 meeting have receded in recent weeks as the conflict escalated, according to pricing in the overnight swaps market.
Overnight swap indexes show markets pricing in a roughly 16% chance of a hike of the benchmark rate to 1% this month, down from around 55% at the start of the week after the collapse of U.S.-Iran talks last weekend. The chances rise to 72% for a move by June.
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