A panel at the Japanese labor ministry has decided to increase the national average minimum wage by approximately five percent to 1,054 yen ($6.85) per hour this fiscal year, marking the largest ever increase, according to public broadcaster NHK on Wednesday.
Achieving sustainable inflation and robust wage growth are considered essential for the Bank of Japan (BOJ) to raise interest rates from their current near-zero levels. Increasing the legally binding minimum wage will enhance households' purchasing power, but it will also reduce profits for small businesses that are already struggling to survive.
Following this decision, labor and business representatives will convene in August to determine pay increases, considering the circumstances in each prefecture. The new minimum wage will be implemented by each prefecture starting from October. The government has established a new goal of reaching a minimum wage of 1,500 yen by the mid-2030s.
In response to escalating living costs and labor shortages, major Japanese companies have granted pay raises of 5.1 percent this year, the highest in over three decades.
