Japanese companies have agreed to increase salaries by 5.25% this year, marking the largest salaries increase for 34 years, Rengo’s largest trade union organization said on Thursday, as inflation and labor shortages are increasing the pressure on continuous increases.

The strong wage increase comes after an average increase of 5.10% last year and 3.58% last year, suggesting that the steady increase in wages becomes the new rule in a country where salaries were stagnant for decades. Rengo lists 7 million members.

The new ‘rule’

“There is a consensus between companies that an increase in inflation wages is essential,” a government official said on the condition of anonymity. “It’s now the new rule,” he points out.

Separately, Japan’s largest business lobby, Keidanren, said on Thursday that the average payment of summer bonuses to large companies this year increased by 4.37% compared to the previous year, reaching the record of 990,848 yen ($ 6,889).

Economists expect the rate of wage growth to remain close to 5% next year, as structural labor shortages and persistent inflation will continue to put pressure on companies to compensate employees with higher pay, although US tariff policies.

The prospects for steady wage increases are critical for maintaining a recovery based on consumption – a prerequisite for the Bank of Japan to repeat interest rates.

Mizuho Research & Technologies predicts salaries by 4.7% next year, estimating that the lowest oil prices will help alleviate the impact on US sweeping duties.