Labor cost pass-through stalls at about 30%. The guidelines were revised on December 26, 2025 (Reiwa 7)It is hard to add higher wages to the price of what you sell
The Guidelines on Price Negotiations for the Appropriate Pass-through of Labor Costs, drawn up by the Japan Fair Trade Commission and the Cabinet Secretariat, were revised as of December 26, 2025 (Reiwa 7). A special survey shows that the pass-through rate for labor costs is lower than for raw materials and energy costs.
Key points
- The guidelines were drawn up jointly by the Cabinet Secretariat and the Japan Fair Trade Commission, against the background that labor costs are not being passed on to prices.
- In the special survey, the pass-through rate (median) was 80.0% for raw material prices and 50.0% for energy costs, versus 30.0% for labor costs. The average for labor costs was 45.1%.
- Industries with a high labor cost ratio include building maintenance and security services, information services, technical services, video, audio and text information production, real estate transactions, and road freight transport.
- Contractors say passing costs on is difficult because ordering parties expect them to absorb costs through productivity gains, because they are asked for detailed explanations and documents, and because they fear harm to future business relationships.
What to do in practice
- Organize the increase in labor costs from wage raises and the like as supporting material for quotations.
- Ordering parties should set up an internal procedure to take part in consultations whenever a negotiation is requested.
When a business raises the pay of its workers, it wants to raise its prices too. But the companies that buy from it often say "that's a problem for us," so raising prices is hard. This is today's challenge. The government has published a model for how to talk it over.
- Increase in personnel costs
- JPY 1,000,000
- Part added to the price
- JPY 300,000
- Part the shop bears
- JPY 700,000
Points
- Rising material costs can be added to prices at about 80%, but wage costs only at about 30%.
- Sellers are sometimes told, "Find a way to handle it yourselves."
- Some are afraid the buyer will end the deal, so they cannot bring it up.
What the words mean
- Price pass-through (価格転嫁)
- Reflecting an increase in costs in the price of a product.
- Labor costs (労務費)
- Money paid to people who work, such as wages.
- Japan Fair Trade Commission: Japan Fair Trade Commission: Guidelines on Price Negotiations for the Appropriate Pass-through of Labor Costs
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.