Toyota Motor Corp, the world's biggest automaker, said on Wednesday it would accept a union demand for the biggest base salary increase in 20 years and a rise in bonus payments, as Japan steps up calls for businesses to hike pay, reports Reuters.

As one of Japan's biggest employers, Toyota has long served as a bellwether of the spring labour talks, which are in full swing at major companies. Many are expected to conclude swiftly as the government seeks inflation-beating wage hikes to ease burdens on consumers.

Toyota's incoming president Koji Sato said the decision to accept the union's demands in full set a benchmark for pay negotiations that he encouraged the rest of the automotive industry to follow, according to an internal publication on the company's website.

The union federation representing 357,000 Toyota group workers had said the base pay rise it had sought was the biggest in two decades, though it had not detailed the size of the increase.

With inflation running at the highest level in 40 years, Japan is under more pressure than ever before to raise wages to revive consumption.

But with the economy struggling - it averted recession in the fourth quarter but grew much less than expected - analysts say pay increases will remain limited to big firms, such as Toyota.

Small and medium-sized companies, which employ most Japanese workers, will struggle to afford pay rises, they say.

Toyota said a deal with the union was struck after the first round of negotiations on Wednesday, adding that the wage increase would also be applied to part-time workers and senior contract workers.

The Asahi newspaper, which first reported the agreement, said the union had also sought one-off bonus payments worth 6.7 months of wages.

The All Toyota Workers' Union is set to hold a media briefing later on Wednesday.

The pay agreement comes as Prime Minister Fumio Kishida has stepped up calls on business leaders to accelerate wage increases, warning of a return to stagflation if pay rises fall short of the rapid increase in prices.

"We will boost consumption and expand domestic demand by promoting efforts toward structural wage increases," Kishida said at a lower house budget committee session on Wednesday.

Honda Motor Co Ltd's labour union is demanding the highest pay hikes in decades, while the workers' union at Nissan Motor Co Ltd requested a monthly wage increase of 3.5%, according to news agency Jiji Press.

Fast Retailing Co Ltd, which owns clothing giant Uniqlo, last month said it would boost pay by up to 40%, fuelling expectations big manufacturers would offer more at annual wage talks with unions this spring.

Video game maker Nintendo Co Ltd said earlier this month that it planned to lift workers' base pay by 10%, despite trimming its full-year profit forecast.