TOKYO (Kyodo) -- Small- and medium-sized companies hold the "key" to raising wages nationwide in the upcoming annual wage talks, the head of a leading Japanese business lobby said Tuesday, amid a trend in which major firms have been raising salaries to outpace inflation.

At a New Year event hosted by three major business groups, Takeshi Niinami, chairman of the Japan Association of Corporate Executives, expressed readiness to support these firms, which employ around 70 percent of Japan's workforce, in passing rising costs onto their clients. The firms have been reluctant to do so for fear of losing business opportunities.

"Now is a critical time to establish a mechanism to consistently increase real wages," Niinami said at the gathering, also attended by top executives from the nation's leading companies.

His remarks came as attention is focused on whether small and midsize firms, whose employees typically receive more modest raises compared with those at larger firms, will join the wage hike trend.

The government of Prime Minister Shigeru Ishiba, who took office in October, has been seeking to establish a positive cycle of wage and price hikes.

Japan's inflation-adjusted wages have been weighed down by surging prices, even after domestic companies agreed to the highest salary raises in three decades during the "shunto" spring wage negotiations between management and labor unions.

For fiscal 2024 through March, major companies decided to increase monthly pay by an average 5.58 percent, surpassing 5 percent for the first time since 1991, according to the Japan Business Federation.

Ryuichiro Nishiyama, president of Seibu Holdings Inc., who also attended the event, said the major department store operator plans to implement pay increases exceeding last year's level, noting that "the economy's virtuous cycle has reached a favorable stage."