Japan's biggest-ever wage hike: what it solves ― and what it doesn't

NHK

a day ago

A government advisory panel has proposed raising Japan's average minimum wage by 63 yen this fiscal year ― a record increase that could help drive real wage growth but also squeeze small businesses.
The increase would lift the national average minimum wage to 1,118 yen.
The council's 63-yen target is a benchmark, not a binding decision. Labor bureaus in each prefecture set their own minimum wages, but in practice they usually collectively hit the target national average. Current minimum wage by prefecture
If the proposed hike is implemented, the minimum wage will top 1,000 yen per hour in every prefecture, and the national average would reach 1,118 yen. Japan lagging in wage floor
Japan's average minimum wage remains low by international standards.
According to Japan's Ministry of Health, Labour and Welfare, the hourly average wages in the UK, Germany or France are about twice what Japan's would be if the proposed changes take effect. Japanese Prime Minister Ishiba Shigeru says his government will implement all possible policies to help raise wages.
Prime Minister Ishiba Shigeru spoke about the minimum-wage hike target: "I will do my utmost to deliver this wage increase to the people, and show that this policy lies at the center of our growth strategy." Popular support but businesses tread a difficult line
Gunma is the only prefecture in the Kanto region where the average minimum wage still falls below 1,000 yen. The proposed wage hike would change that ― a development some see as long overdue.
At a supermarket in Gunma Prefecture's Takasaki City, workers are welcoming the news. A worker at the supermarket eager for the wage hikes
"I hope our pay will go up this year," said one employee.
But for employers, the implications are less straightforward.
The supermarket's management has routinely updated its pay charts in line with minimum wage revisions. And they expect to do so again this year for their roughly 60 part-time workers.
The manager expressed cautious support for the change, acknowledging the value for the workers but pointed to the strain it may place on businesses already under pressure. A supermarket manager in Gunma Prefecture expressed mixed feelings about plans for minimum wage increases.
"I'm happy for the part-timers when their pay goes up. But from a business standpoint, resources are limited. We'll have to find ways to raise productivity with a limited workforce." Economic uncertainty clouds wage hike timing
Broader economic headwinds are making the wage decision even more difficult.
Tokyo's Nikkei 225 stock index briefly fell more than 900 points on Monday as investors reacted to signs of a possible slowdown in the US economy. The shift in sentiment followed the release of US labor data last week.
Adding to the uncertainty, the US is preparing to impose an additional tariff on Japanese automobile imports. While Tokyo and Washington have agreed to cap the combined tariff rate at 15 percent ― lower than discussed earlier ― the timeline for implementation remains unclear. Kanda Keiji, senior economist at Daiwa Institute of Research
Kanda Keiji, a senior economist at Daiwa Institute of Research, says the global economic uncertainty could affect plans to hike Japan's minimum wage.
"The latest target will clearly exceed the surging consumer price index," he says. "This would help improve the standard of living for part-timers and others who would get a direct impact from the increase."
But he warned that the force of Trump's tariffs could soon begin to weigh heavily on Japanese businesses.
"Then, if there's a sudden increase in the minimum wage, it could really hurt the operations of some companies, so the government needs to monitor the situation carefully."' The 1,500-yen push
Japan's government has set an ambitious long-term goal to raise the national average minimum wage to 1,500 yen by the end of 2029. Meeting that target would require average annual increases of nearly 90 yen ― a pace that far exceeds historical norms. Japan is targeting a 1,500-yen minimum wage by 2029.
"This isn't simply a matter of chasing a numerical target," says economist Kanda. "It's a carefully calibrated decision that takes into account business capacity and broader economic conditions. Still, for many companies it will be a very difficult adjustment and we are entering difficult times. Japan may need to come up with more financial measures to support them."