Industrial Unions Hold Consultation Sessions on Passing Through Costs

Feb. 24, 2026

Aimed at accelerating wage increases at small- and medium-sized enterprises (SMEs) through appropriate cost pass-through, the Act on Ensuring Proper Transactions Involving Specified Entrusted Business Operators (Proper Transactions Act) came into effect in January 2026. The law revises and renames the former Subcontract Act, prohibiting ordering companies from unilaterally setting prices without engaging in price negotiations. It also strengthens enforcement by granting supervisory authorities the power to provide guidance and advice.

In response to the enactment of the new law, industrial labour unions, at the initiative of the Japanese Trade Union Confederation (RENGO), have been holding a series of on-site consultation sessions since December 2025 to discuss challenges related to cost pass-through. At these sessions, participants from various industries have voiced concerns about their difficult business conditions, reaffirming the importance of demanding fair transactions during the annual spring wage negotiations.

Case Study: Japan Federation of Transport Workers’ Unions (JFT)

JFT held the first consultation session in mid-December 2025. The trucking sector, in particular, faces severe conditions, ranking lowest among 30 industries in terms of price negotiation and cost pass-through rates. With freight rates failing to rise, business closures and bankruptcies have occurred, while improvements in drivers’ working conditions have lagged. This has raised concerns about labour outflows to other industries and negative impacts on transport capacity.

Under the new law, transport subcontracting transactions—previously outside the scope of regulation—have been newly designated as “specified transport outsourcing transactions.” Practices such as forcing drivers to perform non-transport tasks, including waiting time and cargo handling, without compensation are now explicitly deemed illegal.

At the consultation session, attended by officials from the Japan Fair Trade Commission, participants raised questions about the criteria for determining “unjust price reductions” and expressed concern that negotiations with clients could become nominal, resulting only in marginal price increases. The Commission explained that instead of setting numerical benchmarks, the law prohibits unilateral price determination, emphasizing the importance of “sufficient consultation” that leads to mutual agreement.

Participants also pointed out that excessive price competition among transport operators has become a major obstacle to securing funds for wage increases, calling for corrective government policies. The Commission responded that while forcing unreasonably low freight rates could constitute a violation of the law, it is difficult to regulate price-cutting that results from individual business decisions. With the abolition of the provisional diesel fuel tax scheduled for April 2026, unions expressed concern over potential demands from clients for lower freight rates and stated that they would continue to call for fair pricing and the securing of labour costs.

Case Study: The Federation of Information and Communication Technology Service Workers of Japan (ICTJ)

Meanwhile, ICTJ held a consultation session in late December. In the information and communications industry, particularly in infrastructure construction and maintenance, complex multi-layered subcontracting structures were cited as a major barrier to cost pass-through. As a result, the industry ranks 25th out of 30 in cost pass-through rates.

Participants reported cases in which prices continued to be set based on precedent, despite rising minimum wages and procurement costs, due to long-standing business practices. In many small and micro enterprises, where a single employee often handles all administrative tasks, transaction prices tend to be determined not through formal negotiations but through established relationships and informal “give-and-take” arrangements.

In response, ICTJ stressed the need for ordering companies to reconsider entrenched practices and also identified challenges for industrial unions themselves. Specifically, it emphasized the importance of industrial unions accurately identifying cases in which insufficient cost pass-through prevents adequate wage increases and of providing hands-on support to company-based unions during negotiations. Since some affiliated unions represent large companies on the ordering side, the union concluded that it is crucial to foster a shared understanding across the industry—that cost pass-through is essential for wage growth—and to cultivate a culture of fair transactions.

These consultation sessions have provided a valuable opportunity for industry participants to convey on-the-ground challenges directly to government officials and reflect workplace realities in policymaking. Labour unions are now expected to deepen their understanding of the intent behind the legal reforms and to play an ongoing role in monitoring whether management is achieving appropriate cost pass-through in practice.

To ensure that appropriate cost pass-through is implemented effectively, proactive engagement by both labour and management will be essential going forward. Labour unions are expected to disseminate a clear understanding of the intent of the legal reforms and the interpretation of prohibited practices among their members, while continuously monitoring whether price negotiations at the workplace level are becoming merely nominal. In particular, industrial unions play a crucial role in consolidating cases that are difficult for individual enterprises to address and in strengthening support systems that accompany company-based unions during negotiations.

At the same time, management is urged to reconsider transaction practices that have long been based on precedent and to engage in sincere discussions that reflect rising cost structures, including labour costs. Appropriate cost pass-through should not be viewed solely as an issue of transaction terms, but as a foundation for sustainable workforce retention and business continuity.

By sharing a common understanding of these challenges, labour and management can work together to establish a virtuous cycle of fair transactions and wage growth across entire industries. Such cooperation will be key to enhancing the effectiveness of the new legislation.

（Y.T）