Japan’s record minimum wage hike opens path to sustained GDP growth

TOKYO, Aug. 2 (BNA) Japan’s average minimum wage is set to rise at a record pace this year, the government said Tuesday, in a positive development for Prime Minister Fumio Kishida’s efforts to relieve households from global commodity inflation.

The Health Ministry formally approved a recommendation from its subcommittee to raise the average minimum wage for the current fiscal year ending in March 2023 by 31 yen, or a record 3.3%, from the current level to 961 yen ($7.30) per hour. , Reuters reported.

Kishida is counting on the rally to drive his main policy of distributing wealth to wider sectors of the population to put the Japanese economy on a path of sustainable recovery.

The subcommittee’s recommendation, which is made each year and serves as a national minimum wage standard, was approved by the broader committee that includes management and trade union representatives as well as academics.

The decision on the minimum wage came on the heels of annual spring negotiations, which saw major companies offer wage increases of more than 2% to compensate employees for cost-push inflation.

The government sets minimum wages unlike in the spring wage negotiations, where salaries are decided directly between corporate management and labor unions.

“Given core inflation above 2% and Japanese growth potential of around 1%, the pace of minimum wage increases is reasonable, and reflects the prime minister’s commitment to wage increases,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

“What is important is to raise wages in a sustainable way, rather than making it a one-off step,” he said.

The government has set a goal of raising the average minimum wage to 1,000 yen or higher “as soon as possible.”

Average wages in Japan have barely risen since 2000 despite a tight labor market as weak inflation has given companies, many of which are wary of rising fixed costs, an excuse to delay wage increases.

ZHB