Toyota Motor Corporation, the world’s leading automaker, will support its parts suppliers by incorporating their increased labor costs into delivery prices starting this April, according to a report by the The Sankei Shimbun reported on February 28.
Toyota plans to instruct its first-tier suppliers to factor in labor cost increases from second-tier and lower subcontractors when negotiating parts prices. While antitrust laws prevent Toyota from directly intervening in price negotiations with these subcontractors, the company will determine price hike levels on a case-by-case basis. Sankei Shimbun suggests that Japan’s largest labor union federation, Rengo, which has set a wage increase target of 6% or higher, may serve as a benchmark.
Toyota’s supplier network includes approximately 60,000 companies in Japan alone, so this move is expected to have a positive ripple effect on wage growth among small businesses.
Industry analysts believe Toyota’s decision stems from growing concerns about maintaining the competitiveness of Japan’s domestic supply chain. In a meeting with suppliers on February 21, Toyota President Koji Sato emphasized the uncertainty of business prospects, stating that the group’s foundation is shaking.”
Toyota faces multiple challenges, including the rapid rise of Chinese automakers in electric vehicle development, potential import tariffs proposed by former U.S. President Donald Trump, shifting market dynamics at home and abroad, and the struggle to secure labor amid Japan’s declining population.
According to Sankei Shimbun, Toyota recognizes the need to collaborate with suppliers to improve working conditions, fundamentally reassess work practices, and boost productivity to ensure continued growth. The company hopes this initiative will help distribute funds throughout the supply chain.
