TOKYO - Major Japanese firms, including Toyota and Panasonic, on Wednesday said they would boost employees' salaries for the first time in years, heeding a call from the prime minister ahead of a sales tax rise next month.
The deal came as companies wrap up annual labour talks known as Shunto, or the "spring offensive."
The usually low-key negotiations were being closely watched to see if cash-rich firms would put more money in workers' pockets, amid worries about the tax hike slamming the brakes on growth.
Japan's car sector was a key target, with all eyes on the world's biggest automaker Toyota which - along with other exporters - posted big profits on the back of sharply weaker yen since Prime Minister Shinzo Abe swept to power in late 2012.
On Wednesday, Toyota said it would raise employees' pay by an average of 2,700 yen (S$33) a month, while they would also get an average bonus worth about 6.8 months of their base wage - a common pay structure in Japan.
It was the Camry and Corolla maker's first wage hike in six years, and amounted to about a 0.8 per cent rise above current pay.
Among other firms raising wages were Nissan, Panasonic, Hitachi and Toshiba.
The focus would now shift from blue-chip firms to see if small and mid-sized companies, which employ the bulk of Japanese workers, follow the lead on pay.
The seemingly small wage hikes are a major development in a country that has suffered deflation for years, with consumers rarely facing higher prices for everyday goods.
Abe's growth blitz, dubbed Abenomics, is aimed at reversing falling prices and recent data suggest Tokyo is making headway in stoking lasting inflation, which would mean higher prices.
Consumers are also getting set for a sales tax rise to 8.0 per cent next month, up from 5.0 per cent. The move is seen as crucial to shrinking Japan's massive national debt, but there are fears it could weigh on consumer spending and slow growth.