Japan's Average Minimum Wage To Rise At Record Pace This Year

Japan's average minimum wage is set to rise at a record pace this year, the government said on Tuesday, a positive development for Prime Minister Fumio Kishida's efforts to cushion households from global commodity inflation.

A sub-committee of the health ministry decided on Monday that the average minimum wage for the current fiscal year ending in March 2023 be raised by 31 yen, or a record 3.3%, from the current level to 961 yen ($7.30) per hour, a ministry official told Reuters, confirming an earlier media report.

Kishida is counting on the hike to drive his flagship policy of distributing wealth to broader segments of the population to put Japan's economy on a sustainable recovery.

The sub-committee's recommendation, which is made each year and serves as the nationwide standard for minimum wages, will be formally approved by a wider committee comprising management and labour union representatives as well as academics.

The decision on minimum wages followed annual spring negotiations, which saw big firms offer to raise wages by over 2% to compensate employees for cost-push inflation.

Minimum wages are set by the government unlike the spring wage negotiations, in which salaries are directly set between corporate management and labour unions.

The government set a goal to raise the median average minimum wage to 1,000 yen or higher "at the earliest date possible."

Japan's average wages have barely risen since 2000 despite a tight job market as subdued inflation gave companies, many of whom are wary of increasing fixed costs, an excuse to hold off pay hikes.

But that is changing as rising import costs, driven by supply constraints and the war in Ukraine, push up inflation by forcing more firms to raise the prices of goods.

Japan's core consumer prices rose 2.2% in June from a year earlier, a much slower pace than in many Western economies but remaining above the central bank's target for a third straight month.

($1 = 131.5600 yen)