Toyota Motor has agreed to give its factory workers their biggest pay increase in 25 years, Reuters reported.

Toyota, Nippon Steel and Panasonic have all met union demands for pay rises at annual wage negotiations.

The agreement would have implications for the Bank of Japan (BOJ) which would have to decide whether to raise interest rates later this month, the first time since 2007.

Yoshimasa Hayashi, government spokesperson and chief cabinet secretary, told Reuters: “It’s important the strong wage hike momentum will spread to small and mid-sized firms.”

Toyota said it had agreed to monthly pay increases of as much as JPY28,440 (US$193) and record bonuses.

The firm did not detail percentages.

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Workers at major firms have asked for annual increases of 5.85%, according to the country’s biggest trade union Rengo.

If agreed, that would pass 5% for the first time in 31 years, Reuters reported.