The Central Minimum Wage Council’s subcommittee, an advisory body to the Minister of Health, Labour and Welfare, has agreed on a significant increase in the minimum wage guideline.

On July 25th, it settled on setting the guideline for fiscal 2024 at 1,054 yen per hour on a national average basis. This marks an increase from the current 1,004 yen, a raise of 50 yen, constituting the 22nd consecutive annual increase. This increase surpasses the previous record for the largest raise ever, exceeding the 43-yen raise in fiscal 2023, emphasizing a response to rising prices.

The average wage increase rate in the spring labour–management negotiations for 2024, as compiled by Rengo (Japanese Trade Union Confederation), is at a high level not seen in 33 years, averaging 5.1%. Therefore, a similar increase in the minimum wage was deemed necessary. The Consumer Price Index (excluding owner-occupied housing rent equivalent) has continued to rise by around 3% year-on-year, necessitating adjustments for price increases.

Minimum wages vary by prefecture, with final decisions made by regional minimum wage councils based on the guideline amount. The expected implementation is within October.

It is estimated that approximately 20% of people will be affected by improvements in minimum wage in Japan. Given that this group has a high propensity to consume, the impact on personal consumption is significant, and consequently, it contributes to economic growth as well.

The minimum wage is the wage that companies must pay workers at a minimum. Last year, the national average hourly wage exceeded 1,000 yen for the first time, reaching 1,004 yen, and Japan’s government aims to raise it to 1,500 yen by the mid-2030s.

The government is committed to achieving this goal “sooner” as outlined in the Basic Policy on Economic and Fiscal Management and Reform for 2024. Concrete measures include supporting investments in automation and streamlining to enhance labour productivity and facilitating the environment for mergers and acquisitions (M&A).

Even if Japan achieves an hourly wage of 1,054 yen, Japan’s minimum wage lags significantly behind that of major advanced countries in the era when the exchange rate was 160 yen per dollar: California, USA, is at 2,560 yen; France at 2,128 yen; Germany at 2,176 yen; the UK at 1,888 yen; and South Korea at 1,520 yen.

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