The hike was in line with what the union had demanded and higher than last year's agreed pay rise of 8,600 yen per month.

Toyota wants to lead the auto industry not just in Japan's wage negotiations, but in carbon neutrality and digitalisation as well, Masanori Kuwata, chief human resources officer, told reporters after reaching the wage agreement with the union.

Japanese companies are set to offer the lowest wage increases in eight years as labour talks wrap up on Wednesday, in a sign the COVID-19 pandemic is putting an end to the benefits brought on by former premier Shinzo Abe's stimulus policies.

(Reporting by Eimi Yamamitsu, Maki Shiraki; Editing by Tom Hogue and Himani Sarkar)