Japan Inc set to offer big wage hikes, paving way for end to negative rates

Some of Japan's biggest companies are expected to formally offer sizeable pay increases at annual talks with unions that wrap up on Wednesday, clearing the way for the central bank to end negative interest rates as early as next week.

Economists see substantial wage increases as a prerequisite for the Bank of Japan, or BOJ, to declare that its long-held goals of sustainable wage growth and stable prices are in sight and usher in an end to negative rates in place since 2016.

The bank, which has stuck with massive stimulus and ultra-low rates for years longer than other developed countries in an attempt to jumpstart a moribund economy, is set to hold its next policy setting meeting on March 18-19.

Workers at major firms have asked for annual increases of 5.85%, topping the 5% mark for the first time in 30 years, according to Japan's biggest trade union grouping, Rengo. As a result, some analysts expect this year's wage increases at 5% or more, from just under 4% previously. That would be the biggest increase in some 31 years.

Unions across industries, including automobiles, electronics, metals, heavy machinery and the service sector have all demanded hefty pay hikes.

While rising wages are one of the few bright spots in the world's No. 4 economy — Japan narrowly escaped a technical recession at the end of last year — it remains unclear whether the country is soundly back on the path top recovery.

"Labor shortages and rising costs of living are the two driving factors behind the rising wages," said Hisashi Yamada, a professor at Tokyo's Hosei University professor and an expert on labor policy. "Going forward, it's unclear whether further wage growth will or spread through the economy."

Toyota Motor Corp, the world's biggest