Japan's biggest labour group seeks midpoint target of 6% for 2027 wage increase talks

Japan’s largest labor union, Rengo, has proposed a more ambitious wage bargaining policy for the upcoming annual labor negotiations, targeting a 6% wage increase by 2027, with a minimum benchmark of 5% or more. This marks a shift from previous years, when Rengo had demanded at least a 5% wage increase. The union represents approximately 7 million workers and sets wage targets that guide its member unions.

The new 6% midpoint target aims to signal that 5% should be viewed as a floor rather than a target. Despite the more assertive target, economists expect actual wage settlements in 2027 to remain similar to this year’s level of around 5%. Factors such as chronic labor shortages, strong corporate profits, and a declining labor share of income are expected to justify wage gains comparable to 2026 levels.

While wage hikes of around 5% may be suitable for both the Bank of Japan's inflation focus and workers, hikes larger than that could risk a wage-price spiral and push inflation above the BOJ's 2% target. Rengo has also set a medium-term target to increase wages by 15% from current levels by 2030.