Japan: Minimum Wage Increase Sets Record

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By Toshio Aritake

Aug. 3—Under pressure from Prime Minister Shinzo Abe, Japanese employers have agreed to raising the average national minimum wage by a record amount for fiscal 2016, which began April 1. The increase was made official July 28 with a recommendation to the minister of health, labor and welfare by the ministry's policy commission, Takashi Takemoto, the ministry's officer in charge of minimum wages, told Bloomberg BNA.

The average national minimum wage was raised by 18 yen (18 cents), the previous record increase, to 798 yen ($7.80) per hour in fiscal 2015 and will be raised by 24 yen (24 cents) to 822 yen ($8.00), retroactive to April 1, 2016, Takemoto said, an increase of just over 3 percent. This means that the minimum wages in all prefectures must now be no less than 700 yen.

Government Pressure to Compromise

The ministry's policy commission on minimum wages—which includes representatives of labor, business and academia—annually reviews minimum wages in light of worker living conditions, employer ability to absorb an increase and economic and other factors. Labor representatives had demanded an increase in the 2016 base minimum wage for all prefectures to 800 yen ($8.00), according to a ministry official, who spoke on condition of anonymity, while employers argued that an increase of this size would adversely affect small and medium-size employers (SMEs). The compromise 24-yen increase to 700 yen was offered by the commission's academic members.

Negotiations took less time this year than in the past, Takemoto said, suggesting that employers gave in to indirect pressure from Yasuhisa Shiozaki, the Abe government's minister of health, labor and welfare.

1,000 Yen Hourly Wage

The Abe administration welcomed the policy commission's decision and will take steps to help improve SMEs' productivity and management, chief cabinet secretary Yoshihide Suga told a news conference. According to Suga, the Abe administration plans to eventually raise the average hourly minimum wage to 1,000 yen, although the minister did not commit to a timeline.

Following this fiscal year's national minimum wage rise, Tokyo's minimum wage, the highest among prefectures, will rise to 932 yen ($9.20), Okinawa's, the lowest, to 714 yen ($7.05).

Japan's unemployment rate has been stuck at just over 3 percent in recent months, a condition of near full employment, while the job availability ratio has been trending near a record high level, suggesting a tight employment market. This trend is being fueled by Japan's rapidly decreasing and aging population. By 2050, Japan's population is expected to shrink to less than 90 million from the current 125.9 million and people over 65 to account for a third of that number.

The rapid contraction and aging of the population means that wages across the board need to rise to attract workers, economists have said.

To contact the reporter on this story: Toshio Aritake in Tokyo at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

More information on Japanese population trends is available in Japanese here.

For more information on Japanese HR law and regulation, see the Japan primer.

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