Surpassing the level recommended by a government panel, Japan is set to increase the average minimum hourly wage to 1,004 yen ($6.91). This move comes as inflation continues to impact consumers' purchasing power.

According to reports from the labor ministry, Japanese prefectures are poised to implement an average hourly wage increase of 43 yen for the ongoing fiscal year. This surge marks the most significant uptick since wage rise records were first kept in 1978 and are scheduled to take effect in October.

As per recommendations from the government's advisory panel, a boost of 41 yen to 1,002 yen had been proposed for the current fiscal year. However, the approved increase surpasses this recommendation, setting the average minimum hourly wage at 1,004 yen.

In line with these adjustments, Tokyo, known for having the highest minimum wage across the nation, is planning a 41 yen increase to set its minimum wage at 1,113 yen. Similarly, neighbouring Kanagawa prefecture intends to raise its lowest wage to 1,112 yen after a 41 yen hike. On the other hand, Okinawa, currently with the lowest minimum wage, is planning a more substantial 43 yen increase, bringing the minimum wage to 896 yen.

Reports highlight that persistent inflation continues to exert pressure on Japan's economy. Despite an overall 2.3% increase in cash earnings for all workers in June compared to the previous year, adjustments for price rises revealed a decline of 1.6%. This trend of payrolls failing to keep up with inflation has contributed to the weakening of consumer purchasing power.

Recent gross domestic product (GDP) figures for the last quarter, however, present a mixed picture. While robust external demand drove an unexpectedly high annualized growth rate of 6%, reports also indicate weaknesses in both business and private spending.

Image source: Financial Times