The nation's largest business lobby and labor union held rare direct talks Thursday, seeking common ground ahead of their annual wage talks that could affect the Abe administration's efforts to revitalize the economy.

"This year's spring labor offensive has drawn high expectations from the public. By expanding earnings, we will make all-out efforts to raise salaries," Keidanren Chairman Sadayuki Sakakibara told a meeting with Rengo (the Japanese Trade Union Confederation).

Rengo chief Nobuaki Koga said that "as wages have not followed the rise of prices, more (wage) hikes are necessary. We are standing at a crossroads over whether we can exit deflation."

Rengo will be demanding at least a 2 percent pay-scale rise for all industries in addition to regular wage hikes based on seniority, doubling the target from last year.

Keidanren said in its recent report that raising pay scales is "one of the options" for its member firms to increase salaries. But it has also shown reluctance to accept any across-the-board hikes, saying earnings vary from one company to another.

The administration, Keidanren and Rengo agreed last month to cooperate in securing wage hikes in the negotiations that will continue through March.

Prime Minister Shinzo Abe has been urging companies to implement wage hikes and help achieve his policy goal of beating nearly two decades of deflation.