Responses to Spring Wage Negotiations: Will Significant Pay Raises Spread to Small and Medium-Sized Enterprises?

Editorial

15:00 JST, March 19, 2026

It is encouraging to see major companies announcing substantial wage increases during this year’s shunto spring wage negotiations. However, as the shunto negotiations for small and medium-sized enterprises (SMEs) are set to begin in earnest, concerns about the future are growing due to factors such as the situation in Iran.

It is important for the public and private sectors to work together to create an environment that enables SMEs, which account for 70% of employment, to implement wage increases.

Major companies have simultaneously responded to labor unions’ wage increase demands, with many agreeing to meet the full amount requested.

Companies in the automotive sector — which is leading the wage negotiations — such as Toyota Motor Corp., along with companies in the electronics sector, including Hitachi, Ltd., NEC Corp., and Mitsubishi Electric Corp., all offered the full amount requested. Notably, many companies also offered the full amount for base pay increases.

The best way to overcome persistent high inflation is to continue raising wages. Until last year’s spring wage negotiations, high wage increases exceeding 5% were achieved for two consecutive years.

The fact that positive responses were widespread among major companies suggests that the view that wage increases are a social responsibility is becoming firmly established among both labor and management.

Honda Motor Co., which is expected to post a massive loss, also responded with the full amount — apparently out of a sense of the gravity of its responsibilities.

The failure of wage increases to keep pace with rising prices remains a challenge for the Japanese economy. Last year’s real wages, adjusted for inflation, fell by 1.3% year-on-year, marking the fourth consecutive year of decline. Under these circumstances, consumer sentiment will not improve, and a strong Japanese economy cannot be achieved.

The Japanese economy is facing a critical juncture that will determine whether it can emerge from a long tunnel. The wage negotiations at SMEs hold the key to creating a virtuous economic cycle.

The current concern is that Iran has effectively blocked the Strait of Hormuz, causing oil prices to skyrocket.

This could dampen the momentum for wage increases at SMEs, as it drives up prices for a wide range of products and services, including utilities, logistics and fuel.

Being in a weaker bargaining position, it has become the norm for SMEs to find it difficult to pass on increased costs in their transaction prices when doing business with large corporations.

In order for SMEs to secure the funds needed for wage increases, it is essential that large companies take steps to ensure that these businesses can appropriately pass on increases in labor and raw material costs in their transaction prices.

The government is urged to step up its oversight to ensure fair trading practices. Will SMEs face cash flow difficulties? The government is also urged to consider support measures in anticipation of the global situation becoming protracted.

It will also be necessary to rigorously manage business risks. As labor shortages become more severe, companies are urged to step up their efforts to improve labor efficiency. Also, they should not neglect investment in facilities and research and development to support their growth.

(From The Yomiuri Shimbun, March 19, 2026)