Japan’s uneven wage revival risks greater labour market inequality

Japan’s 2026 shunto wage negotiations delivered average wage increases of over 5 per cent for a third consecutive year. But gains are concentrated in large corporations, while small and medium-sized enterprises — employing around 70 per cent of Japan’s workforce — struggle with rising labour costs, productivity gaps and record bankruptcies. Without deeper SME modernisation, digital adoption and labour market reform, Japan’s wage revival risks remaining uneven and fragile rather than translating into sustained, broad-based income growth.