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Record hike proposal to minimum wage in Japan

As the rising inflation melts the wages in Japan, the government thinks that the record minimum wage hike will make a positive contribution to growth.

As Japan struggles to cope with rising costs of living, the government is preparing to raise the minimum wage to a record high to support low-income households.

According to Japan’s Ministry of Labor, the advisory board recommended an increase of 31 yen (about $4.25), or 3.3 percent, in the average hourly minimum wage. According to Bloomberg’s report, the average hourly minimum wage is currently 930 yen (about 127 TL).

According to Reuters, the proposal is prepared annually by a large committee of business executives, union representatives and academics.

Consumer inflation excluding food in Japan was 2.2 percent in June, above the Bank of Japan’s 2 percent target.

On the other hand, the inflation level in Japan is still far below the world average.

RECORD SINCE 2002

If the proposal is implemented, it will see a record increase in both quantity and percentage since 2002, when the government began using the hourly wage as the benchmark.

While Japanese Prime Minister Fumio Kishida wants a more equitable distribution of wealth, he sees salary increases as a key driver of growth.

Except for fiscal year 2020, marked by the pandemic, the minimum wage has increased by at least 2 percent since fiscal 2013 under the economic program of former Japanese Prime Minister Shinzo Abe, who was recently assassinated.

“Raising the minimum wage is important for public investment,” Seiji Kihara, Deputy Chief Secretary of the Cabinet of Japan, told reporters on Monday before the board’s decision. I hope it will increase at a pace suitable for the new age of capitalism,” he said.

WAGE GROWTH UNDER 3 PERCENT

Other measures in addition to the minimum wage show a moderate increase in workers’ salaries. However, in general, the rate of increase in wages is below 3 percent.

According to Rengo, the largest umbrella organization of trade unions, approximately 4,900 unions in Japan achieved a 2.07 percent increase in average monthly wages in this year’s wage negotiations. The most during Abe’s tenure was 2.2 percent in 2015.

But most workers in the country are not represented by unions, as the unionization rate is 16.9 percent in 2021, according to Japan’s Ministry of Labor.

INFLATION DISCHARGES FEES

Total cash earnings for all workers rose just 1 percent in May from a year ago, while real wages adjusted for inflation fell 1.8 percent. This means that inflation has eroded the purchasing power of Japanese people.

Tsuyoshi Ueno, a senior economist at the NLI Research Institute in Tokyo, Japan, said the minimum wage increases helped households, but meant a higher cost for companies.

The economist said that unless companies increase their productivity, a minimum wage hike could cut the hours of part-time workers and not bring positive economic growth.

‘THE IMPORTANT IS TO ENSURE SUSTAINABLE INCREASES’

“The pace of minimum wage increases is reasonable given the core inflation rate of over 2 percent and Japan’s growth potential of around 1 percent,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

“The key is to raise wages sustainably rather than making a one-time move,” Maruyama said.

Source From: Sozcu

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