Japan's labour ministry has proposed a historic increase in the minimum wage for the fourth year in a row, aimed at supporting low-income households amid rising prices. The advisory panel recommends a 50 yen hourly increase, a 5% rise that exceeds last year's 43 yen boost and represents the largest increase since the government began setting minimum wage targets in 1978.

This adjustment will raise the national average minimum wage to 1,054 yen ($6.90) per hour.

This proposed increase follows significant wage gains from recent negotiations, with some workers achieving a 5.1% salary increase—the highest in over 30 years. These increases are gradually being reflected in paychecks, as detailed in the latest monthly wage report.

The wage hike is expected to particularly benefit low-income households, which are most impacted by ongoing inflation. Consumer confidence surveys reveal that sentiment among these groups has worsened compared to wealthier individuals.

Japan’s economy has been hampered by sluggish consumption, complicating efforts to stimulate growth. Falling real wages and weak consumer spending are challenges that Bank of Japan officials are considering as they deliberate on potential interest rate adjustments.

Prime Minister Fumio Kishida aims to raise the minimum wage to 1,500 yen by the mid-2030s, targeting an annual increase of approximately 3.5%. Recent government measures include boosting productivity and supporting automation investments to reach this goal.

However, the wage increase may put pressure on smaller firms already facing financial challenges. A survey by the Japan Chamber of Commerce and Industry found that around 60% of smaller businesses have had to raise wages due to adverse economic conditions.

Chief Cabinet Secretary Yoshimasa Hayashi has supported the wage increase but noted that further government efforts will be necessary to help smaller firms manage labour costs and improve productivity.