A panel at the Japanese labor ministry has made a significant decision: raising the national average minimum wage by approximately 5% to 1,054 yen ($6.85) per hour. This marks the largest single increase in the minimum wage, as reported by public broadcaster NHK on Wednesday. The move signifies a crucial step towards achieving sustainable inflation and strong wage growth, both considered prerequisites for the Bank of Japan (BOJ) to raise interest rates from their current near-zero levels.
Boosting household purchasing power is a primary objective of this wage increase. However, the decision carries potential ramifications for small firms already struggling to maintain profitability. The increased labor costs could strain their profit margins.
Following the panel’s decision, representatives from both labor and business sectors will convene in August to finalize pay hikes. This process will consider the specific circumstances of each prefecture. The new minimum wage is set to be implemented across all prefectures starting from October.
The government has established a long-term goal of reaching a minimum wage of 1,500 yen by the mid-2030s. This ambitious target reflects the growing need to address the pressures of rising living costs and a shrinking workforce.
In response to these challenges, major Japanese companies have demonstrated a commitment to addressing the issue by offering pay rises of 5.1% this year. This represents the largest increase in over three decades, reflecting a broader shift in corporate attitudes towards employee compensation. The increased minimum wage and corporate pay raises are expected to have a significant impact on the Japanese economy and workforce, potentially leading to a more equitable distribution of wealth and improved living standards for many citizens.
