(Bloomberg) -- Japan’s largest labor union federation will reportedly demand wage increases for next year that exceed this year’s historic gains, boosting the prospects for the positive growth cycle the central bank needs to see before it can pare back stimulus.

Rengo, the country’s biggest trade union group, is planning to urge companies to raise wages by “at least 5%” when it engages in annual wage negotiations next year, NHK reported Tuesday, citing an unidentified source. The goal would be slightly more ambitious than the one laid out before this year’s talks, when the union sought “about” a 5% increase.

This year’s spring pay negotiations between major firms and workers ultimately delivered the largest gains in around 30 years, if not quite at the initial targeted range. The union is expected to release an outline of its strategy for next year’s talks on Thursday, with a more detailed plan in December.

Wage gains are a key factor that would help Bank of Japan Governor Kazuo Ueda achieve his goal of sustained inflation at 2% feeding into steady growth, a prerequisite before he can pare back stimulus.

BOJ board member Asahi Noguchi said last week that base pay needs to grow at a pace close to 3% as a trend for the bank’s sustainable price target to be met.

The goal for 2024 will include base salary increases of 3% or more, according to NHK. 

Continued wage hikes are also a main priority for Prime Minister Fumio Kishida as he focuses on improving income distribution as one of his centerpiece policies.  

The premier ordered the ruling party to compile economic measures by the end of this month that will likely include provisions to support wage growth, especially at smaller firms, which employ around two-thirds of all company workers.

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