Key Facts
The 95th May Day Central Rally, organized by the Japanese Trade Union Confederation (Rengo), was held on April 26 in Tokyo, emphasizing the critical need for wage increases, particularly among small and medium-sized enterprises (SMEs). SMEs employ approximately 70% of Japan’s workforce, making their wage growth essential for the country’s full recovery from deflation. However, the momentum for wage hikes has slowed, partly due to the impact of the U.S. Trump administration’s high-tariff policies, which have led many companies to adopt a wait-and-see approach.
The peak of the “SME Spring Wage Offensive” typically occurs between April and May, following agreements reached by larger corporations. According to Rengo’s fourth round of data released on April 17, the average wage increase rate for SMEs with fewer than 300 union members was 4.97%, a 0.22 percentage point rise compared to the same period last year. However, this figure marked a decline from the initial March report, which recorded a 5.09% increase.
The number of companies reaching agreements has also decreased. While the initial report showed figures comparable to the previous year, the third round saw 159 fewer unions reaching agreements, and the fourth round reported an additional drop of 165 unions. This decline coincided with the implementation of the U.S. high-tariff policies, which have raised concerns about reduced imports, declining transactions with large corporations, and worsening business performance. These factors have led some companies to view current wage levels as a ceiling, potentially seeking lower rates in the future.
Rengo has set an ambitious target for SME wage increases at 6% or higher, exceeding the overall goal for large corporations by 1%. This aims to address the wage gap between SMEs and larger firms. However, achieving this target remains uncertain, with current rates struggling to reach the 5% range.
Keidanren Chairman Masakazu Tokura has also expressed concern, acknowledging the negative impact of tariffs on SMEs. Meanwhile, Rengo faces challenges in maintaining its influence, as union membership has declined significantly. In 2024, the estimated unionization rate fell to a record low of 16.1%, with total membership dropping below 7 million, compared to over 8 million in 1989.
Rengo’s leadership will be crucial in revitalizing the SME wage negotiations amid these challenges.
The 95th May Day Central Rally, hosted by the Japanese Trade Union Confederation (Rengo) on April 26 in Tokyo, highlighted the urgent need for wage increases, particularly for small and medium-sized enterprises (SMEs), which employ about 70% of Japan’s workforce. Rengo’s latest data, released on April 17, showed an average wage increase of 4.97% for SMEs with fewer than 300 union members, a slight improvement from the previous year but a decline from the initial March report of 5.09%.
The number of companies reaching wage agreements has also dropped, with 165 fewer unions finalizing agreements in the fourth round compared to earlier data. This slowdown is partly attributed to the U.S. high-tariff policies, which have negatively impacted imports, transactions with large corporations, and overall business performance.
Rengo has set a 6% wage increase target for SMEs, exceeding the goal for larger corporations by 1%, to address wage disparities. However, achieving this remains uncertain as current rates struggle to reach 5%. Meanwhile, union membership has declined significantly, with the unionization rate hitting a record low of 16.1% in 2024. Rengo’s leadership will be critical in navigating these challenges.
