Editorial: Sustainable pay raises a must as Japan OKs largest minimum wage hike

This fiscal year’s minimum wage in Japan will be significantly raised. A government council has agreed to hike the current national weighted average of 1,004 yen (roughly $6.72) per hour to a record 1,054 yen ($7.05). The 50-yen (33-cent) increase is also the highest on record. To ensure that workers can live with peace of mind, this trend must continue into the next fiscal year and beyond.

This is the minimum wage applied to all workers, regardless of employment type. Many nonregular contract workers and those working at small- and medium-sized businesses are paid minimum wage. It serves as a safety net for workers.

The council’s deliberations focused on addressing rising prices, particularly the surge in the prices of basic necessities. The substantial increase should be appreciated. However, a full-time job on minimum wage brings in an annual income of only around 2 million yen (about $13,400), which is still insufficient for stable living. Continuous incremental increases are necessary.

Still, many challenges remain.

It is crucial to create an environment where not only large corporations, which agreed to the full amounts of wage hikes demanded by labor unions in labor-management negotiations this spring, but also small- to mid-sized businesses with weaker management foundations can raise wages. The government should strengthen oversight to make sure that smaller businesses can reflect increased labor costs in their prices in transactions with large corporations. Continuing support for investment in equipment and digitalization to improve productivity is also important.

Addressing regional disparities is also urgent. Currently, there is a 220-yen ($1.47) difference in the minimum wage between Tokyo, which retains the highest minimum wage in Japan, and Iwate Prefecture, which has the lowest. This disparity is contributing to an outflow of talent from rural areas.

This time, a 50-yen increase has been indicated for all regions nationwide. However, following the guideline alone will not narrow the gap.

Moving forward, each prefectural advisory council will determine the actual amount of wage hikes based on the guideline. From the perspective of regional revitalization, they are urged to seek the maximum possible increase according to the circumstances in each area.

Due to the declining birth rate and aging population, labor shortages are expected to become more severe. If companies continue management practices that rely on suppressing labor costs, it will not be possible to secure the necessary workforce.

The Japanese government has set a goal of raising the minimum wage to 1,500 yen (roughly $10) by the mid-2030s. To enable sustainable wage hikes, companies must fully commit to management reforms.