(Bloomberg) -- Japanese Prime Minister Fumio Kishida and a top union leader amplified their calls for strong wage growth as companies prepare to engage in annual pay negotiations.

“I’d like to ensure that the growth in disposable income exceeds price rises,” the premier said at a New Year’s event hosted by Rengo, the nation’s biggest trade union federation. “We will mobilize all of our policies to achieve this goal.”

Tomoko Yoshino, chief of Rengo, said, “This is a critical moment.”

The remarks came against a backdrop of heightened interest in this year’s spring wage talks, which are crucial to the Bank of Japan’s quest of achieving a virtuous wage-inflation cycle. Wage gains feeding into demand-led price gains are a condition for any move to normalize monetary policy.

Governor Kazuo Ueda stressed in a series of New Year’s events that he hopes wages and inflation will rise in a balanced manner in 2024.

A number of firms have signaled their intention to conduct ambitious wage hikes for some segments of their staff. Nomura Holdings Inc. announced a 16% pay increase for younger employees in its brokerage subsidiary, while Tokyo Electron is reportedly set to raise its starting salary by an average of about 40%. 

Supermarket and convenience store operator Aeon Co. plans to lift hourly wages for 400,000 part-time workers by 7% by summer and conduct wage increases for full-time staff that exceed the increases of last year, according to the Nikkei.

“I’d like to hope that Aeon’s actions will spill over in a positive way across the sector,” Yoshino said. She added, “It is very important that we achieve wage increases for the second year in a row and at a level even higher than the previous year.”

Ueda said after last month’s policy board meeting he’s seen positive comments pertaining to the outlook for wages, adding that he still needs to see more data before making any decisions. The New Year’s Day earthquake convinced the minority of economists predicting a rate hike in January to push back their timelines to match the mainstream view, which sees the bank’s first rate hike since 2007 coming in April.

“The current cost-push inflation is driven by higher import costs and is heavily influenced by the exchange rate,” said Akihiko Matsuura, chief of the UA Zensen labor union group, which covers workers in industries including textiles, restaurants and medical. “This cannot be said to be a healthy price increase.”

Kishida’s cabinet is also focused on improving household finances, as the combination of rising costs of living and a political funding scandal have pushed its disapproval rating to the highest since 1947, according to one poll.

The government plans an income tax cut in June and fiscal incentives for companies that administer large wage increases. The draft budget for the fiscal year from April includes a ¥1 trillion fund to spur wage rises and alleviate the impact of inflation.

The combination of wage gains and tax cuts will boost per capita income by an estimated 3.8% next fiscal year, the Cabinet Office said in December. That would top the government’s 2.5% inflation forecast.

Rengo has demanded in principle “at least 5%” wage increases from companies as part of its basic vision for upcoming wage negotiations.

Smaller firms have been less generous with compensation increases as their margins have been squeezed by rising materials costs that can’t fully be passed on to customers. The Japanese Association of Metal, Machinery and Manufacturing Workers, which represents small manufacturers, is seeking an average 4% increase in base wages, the Nikkei reported in November.

(Adds comments from Kishida)

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