By Maki Shiraki and Eimi Yamamitsu
TOKYO (Reuters) -Toyota Motor Corp, the world's biggest automaker, said on Wednesday it would accept a union demand for the biggest base salary increase in 20 years and a rise in bonus payments, as Japan steps up calls for businesses to hike pay.
As one of Japan's biggest employers, Toyota has long served as a bellwether of the spring labour talks, which are in full swing at major companies. Many are expected to conclude swiftly as the government seeks inflation-beating wage hikes to ease burdens on consumers.
The automaker's incoming president Koji Sato said the decision to accept the union's demands in full at the first round of talks was meant not just for Toyota but "also for the industry as a whole, and in the hope that it will lead to frank discussions between labour and management at each company."
Within hours of Toyota's announcement, rival Honda Motor Co Ltd said it had agreed to union demands for a 5% pay increase. The average monthly base salary rise of 12,500 yen ($92.70) at Honda is the biggest jump since at least 1990.
Toyota and the union federation representing 357,000 Toyota group workers said the base pay rise was the biggest in two decades, though they both declined to provide the percentage increase.
With inflation running at around 4% - the highest level in 40 years following decades of deflation - Japan is under more pressure than ever before to raise wages to revive consumption.
But with the economy struggling - it averted recession in the fourth quarter but grew much less than expected - analysts say pay increases will remain limited to big firms, such as Toyota.
Small and medium-sized companies, which employ most Japanese workers, will struggle to afford pay rises, they say.
Toyota said its wage increase would also apply to part-time workers and senior contract workers and it had agreed to union's request for one-off bonus payments worth 6.7 months of wages.
Takaaki Sakagami, deputy secretary-general of the Federation of All Toyota Workers' Union, said the union was pleased it had been able to reach a deal with the company quickly.
The pay agreement comes as Prime Minister Fumio Kishida has stepped up calls on business leaders to accelerate wage increases, warning of a return to stagflation if pay rises fall short of the rapid increase in prices.
"We will boost consumption and expand domestic demand by promoting efforts toward structural wage increases," Kishida said at a lower house budget committee session on Wednesday.
Fast Retailing Co Ltd, which owns clothing giant Uniqlo, last month said it would boost pay by up to 40%, fuelling expectations big manufacturers would offer more at annual wage talks with unions this spring.
Video game maker Nintendo Co Ltd (TYO:7974) said earlier this month that it planned to lift workers' base pay by 10%, despite trimming its full-year profit forecast.
($1 = 134.8500 yen)