Early signs for Japan 2026 wages bolster case for near-term BOJ rate hike

Early signs on Japan’s annual wage negotiations for next year point to another round of solid pay hikes despite profit pressure from U.S. tariffs, bolstering the case for the Bank of Japan to raise interest rates further.
The wage outlook has drawn renewed attention after BOJ Governor Kazuo Ueda said he wanted “a bit more data” on the initial momentum of next year’s wage talks – notably whether firms hit by U.S. tariffs would keep lifting pay.
Labour unions have already made clear they will again demand bumper pay hikes. Sustained wage growth would underpin private consumption, giving the BOJ confidence to raise rates without derailing Japan’s economic recovery. Despite hefty increases in recent years, real wage growth has remained negative as core consumer inflation has held above the BOJ’s 2% target.
Rengo, Japan’s largest labour union umbrella group, with 7 million members, is seeking wage hikes of 5% or more in 2026. That is what Rengo asked for in 2025, resulting in the biggest pay hike in 34 years.