Analysis-As inflation bites, Japan's PM finds unlikely ally in labour unions

FILE PHOTO: A worker cycles near a factory at the Keihin industrial zone in Kawasaki, Japan February 17, 2016. Japan's automaker labour unions are reducing their demands for pay rises for the next fiscal year from amounts sought the previous year, a move that could hamper the Abe government's efforts to stoke demand and defeat deflation. REUTERS/Toru Hanai/File Photo

As Japan faces its first major battle with inflation in decades, Prime Minister Fumio Kishida is extending a rare olive branch to labour unions, who he sees as crucial to his wider push to boost household wealth.

Wage stagnation has blighted Japan's workers for years as the country was mired in a deflationary mindset that stopped firms raising salaries, and as weakened unions shied away from demanding more pay.