Japanese motor industry giants Toyota and Honda said they have agreed to give their workers in the country the biggest pay rises in decades.

They are the latest firms in the world’s third-largest economy to increase wages as prices jump as a result of myriad difficulties the global economy is facing.

Official figures published showed Japan’s rate of inflation which edged up to 3.7 percent, was its highest level in over 40 years. That has put pressure on businesses and authorities to help people as their spending power shrinks.

Each year Japanese firms typically hold pay talks with unions for weeks before announcing their decisions around the middle of March. However, the car makers did not say why this year’s announcements were made earlier than usual.

Toyota announced that it will meet union demands for pay and bonuses, with wages increasing by the most in 20 years.

Toyota’s incoming President Koji Sato said that he hoped the move would have a positive impact across Japan’s motor industry and “lead to frank discussions between labour and management at each company.”

Meanwhile, rival car maker Honda said that it has “fully answered” union requests for wage increases and bonuses. The company said it has raised salaries by 5%, marking the biggest increase since 1990 and above Japan’s rate of inflation.

“Despite the severe business environment, management has a strong desire to create an environment in which all employees can push forward with their work with a sense of urgency,” Honda spokesperson said

Japan’s Prime Minister Calls on Firms To Raise Wages

Earlier this year, Japan’s prime minister Fumio Kishida called on firms to raise wages to help people struggling with rising prices. In January, the owner of fashion chain Uniqlo, Fast Retailing, said it would raise the pay of staff in its home country by up to 40%.

The company said the new pay policy would apply to full-time employees at its headquarters and company stores in Japan from the beginning of March 2023.

For decades, both prices and wage growth in Japan have been stagnant. In recent months, inflation around the world jumped as countries eased pandemic restrictions and the war in Ukraine pushed up energy prices.

In December, Japan’s core consumer prices rose by 4% from a year earlier, double the central bank’s target level and the highest rate in 41 years.

Honda Motor Co., Ltd is a Japanese public multinational conglomerate manufacturer of automobiles, motorcycles, and power equipment, headquartered in Minato, Tokyo, Japan.

Honda has been the world’s largest motorcycle manufacturer since 1959, reaching a production of 400 million by the end of 2019, as well as the world’s largest manufacturer of internal combustion engines measured by volume, producing more than 14 million internal combustion engines each year. Honda became the second-largest Japanese automobile manufacturer in 2001. In 2015, Honda was the eighth-largest automobile manufacturer in the world.

Toyota Motor Corporation is also a Japanese multinational automotive manufacturer headquartered in Toyota City, Aichi, Japan. It was founded by Kiichiro Toyoda and incorporated on August 28, 1937. Toyota is one of the largest automobile manufacturers in the world, producing about 10 million vehicles per year.