Ahead of this year’s Shunto, Rengo had indicated that it would be asking large companies to agree to raise their wages by at least 5%, roughly on par with what we saw last year. Meanwhile, seeking to shrink the wage gap between large firms and small and medium-sized companies (SMEs), it also raised its request for SMEs to increase their wages by 6% or more, which was higher than the 5% or more it had asked for last year.
However, the wage increase rate among SMEs with fewer than 300 Rengo members (according to the third round response data) currently stands at 5.00%, which is lower than the average 5.44% wage hike agreed to by large firms employing 300 or more Rengo members, and this means that the wage level disparity between them is only expanding further.
That said, if wages were to be raised at these SMEs too drastically in an attempt to close that wage level gap with large firms all at once, that could harm those SME’s earnings environments, and potentially even lead to management difficulties and job cuts. Shrinking that gap probably needs to be done in a way that also entails improving productivity at these small and medium-sized businesses.
The average wage hikes to come at these SMEs—which will be agreed upon and decided in the near future—are expected to fall below the average level at large firms which have more or less already been decided, and therefore we can anticipate that as the responses continue to be tallied, the average value of these wage hikes will decline. We may foresee that the average rate of wage increase in 2025 (including periodic salary bumps) will ultimately come out to around 5.3%, and thus will end up being slightly higher than the 5.1% increase that we saw in 2024.
Given the results of the wage hikes from this year’s Shunto, some are taking the positive view that sharp wage hikes are becoming the norm in Japan. However, in actuality, it remains the case that these wage hikes are simply following the high rate of inflation, and so the reality seems to be that any improvement in real wages minus inflation is lagging behind.
Last year, the rate of increase in nominal wages essentially kept up with the inflation rate, but it was the Shunto that provided the impetus for this. It is clear that while this year’s wage rate increase is highly likely to exceed last year’s level, that rise lacks  momentum compared to last year. This is because in 2024, the average wage increase rate year-on-year jumped up from around 3.6% to around 5.1%, whereas this year, that rate is projected to exceed last year’s level only slightly. Hence, we cannot expect the wage increase rate to significantly surpass the inflation rate, or real wages to make a conspicuous rebound.

As revealed by the June 2024 Monthly Labor Survey, real wages were up 1.1% compared to a year prior, showing positive growth for the first time in 27 months. Yet subsequently, real wages continued to hover at near-zero levels year-on-year, coming in at -2.8% this January, followed by -1.2% in February, reflecting another streak of negative growth. Underlying this trend is the fact that the upward tick in the inflation rate intensified at the end of last year (Fig. 1).


Looking at the results of this year’s Shunto up to now, we may expect that the rate of increase in average nominal wages (total cash earnings) for 2025, which roughly corresponds to the base pay increase excluding periodic salary bumps, will come out to approximately 3.1%. This is because although the rise in base pay as of the time that the third-round data was tallied for the Shunto was 3.82%, we can expect that SMEs and micro-enterprises will substantially bring down the average value of their final base salary hikes, which will be decided in the near future.
Given these circumstances, it is being forecasted that the rate of increase in real wages year-on-year will remain negative for some time, with positive growth taking hold only after the middle of the year and into the summer (Fig. 2).


The Shunto wage increase rate should be assessed in terms of the real wage level minus the inflation rate. From this standpoint, the wage rate increase in this spring’s Shunto –while ostensibly still at a high level—cannot possibly be considered high. This increase is quite evidently inadequate when it comes to gaining back the significant losses in real wages seen over the past few years.

Recently, the alarms have been sounded regarding the adverse effects that the tariffs announced by the Trump Administration will have on Japan’s economic prospects. Falling stock prices and other signs of upset in the financial markets have also served to amplify those fears. Under the circumstances, it is possible that companies will grow more cautious about raising their wages, meaning that the wage increase rate at next year’s Shunto could be markedly lower.
The government’s aim is for the rate of wage growth to exceed the inflation rate, but it would seem quite difficult to boost the rate of wage increases any further in this kind of environment. In order to achieve a rebound in consumer spending, the key will be to aggressively clamp down on the inflation rate, which has been ticking up recently, in an effort to improve real wages. I believe the government would probably do well to enact policy measures that place a greater emphasis on restoring price stability.
The government’s first step should be to make efforts to quickly stabilize the skyrocketing price of rice. One may also hope that in conjunction with the Bank of Japan’s normalization of monetary policy, the government will try to correct the yen’s depreciation by making a currency intervention as needed, and thus seek to restore stability to import prices which have a major influence on food and energy prices.