TOKYO - Toyota Motor, the world’s biggest automaker, did not reach an immediate agreement on Feb 21 with its union over demands for hefty pay hikes but will continue talks in the coming days, raising doubts about current expectations for wage talks.

Toyota has long served as the pace-setter for Japan’s annual spring labour-management wage offensive, and had accepted the union’s demand in full on the first day of the annual wage negotiations in the past two years.

A spokesperson for the automaker said talks would continue into the next round. In 2023, Toyota struck a deal cementing the biggest pay hike in more than three decades.

However, in a sign that 2023’s wage growth still has momentum, Honda Motor, Japan’s second-largest automaker, on Feb 21 said it has responded in full to union demands for a record rise in base pay and bonus payments.

Prime Minister Fumio Kishida’s government is counting on wage talks to drive sustainable pay hikes and stable inflation and put a decisive end to about two decades of deflation.

This year’s labour talks are being closely watched by the Bank of Japan, which sees sustainable wage and price hikes as a prerequisite to normalise monetary policy.

Toyota’s labour-management talks are scheduled to take place again on Feb 28 and March 6, before a formal offer for 2024 pay hikes on March 13 along with other blue-chip Japanese companies. If Toyota agrees to the union’s demands, it would mark the fourth straight year of full acceptance.

The Federation of All Toyota Workers’ Union demands record bonus payments worth 7.6 months of salary, while seeking monthly pay raises of up to 28,440 yen (S$255) depending on job qualifications and occupation.

Japanese labour unions have entered 2024’s annual wage talks with demands for pay rises well in excess of 2023’s hikes, which were the biggest in more than three decades.

Many blue-chip companies are due to formally offer unions handsome pay increases on March 13, followed by small firms in the coming months.

Private-sector economists expect major firms to offer wage hikes of about 3.9 per cent on average, the largest in 31 years. Excluding seniority-led pay scale, however, base pay that determines the strength of incomes, may undershoot rising prices, heaping downward pressure on real wages.

If workers manage to secure the expected wage hikes, that could lay the ground for the central bank to exit its negative rates as early as in March or April. REUTERS