Japan’s national average minimum wage is set to exceed 1,000 yen ($7.14) per hour for the first time after a government panel proposed raising it to 1,002 yen ($7.16) for fiscal year 2023. While this represents the largest hike in over 30 years, Japan’s minimum wage still remains far below most other developed countries.
The 4.3% increase comes as the government aims to drive up wages amid rising inflation that has squeezed household budgets. However, at 1,002 yen per hour, Japan’s minimum wage converts to just $7.16, which is barely half the $15 federal minimum wage in the United States.
Compared to other Group of Seven nations, Japan’s minimum wage is the lowest. The minimum wage in the United Kingdom currently stands at £9.50 ($11.37) per hour. In France, it is €11.07 ($11.46) per hour, while Germany has a national floor of €10.45 ($10.68). Canada’s federal minimum wage is C$15.55 ($10.33) per hour.
In fact, among OECD countries, Japan has the 6th lowest minimum wage when converted to U.S. dollars. South Korea’s minimum wage is nearly $9 per hour, while Australia has the highest at over $14.
The relatively low minimum wage in Japan is likely a key factor driving down wages for foreign workers. A recent OECD report found that immigration has put downward pressure on wages for low-skilled workers in Japan even as the domestic labor force shrinks.
While the hike to over 1,000 yen is a step in the right direction, economists say Japan will need to implement more significant increases to bring its minimum wage closer to international standards. This is particularly important as Japan looks to attract more foreign workers to address acute labor shortages.
“Japan’s minimum wage is still quite low compared to other advanced economies,” said Masamichi Adachi, Chief Economist at UBS Securities Japan. “To attract and retain foreign talent, Japan needs to accelerate the pace of increases to at least match minimum wages in places like South Korea and the United States.”
With the government targeting a “virtuous cycle” of wage and price growth, ongoing hikes to the minimum wage will be essential. However, policymakers must also ensure support measures are in place for small businesses struggling with rising labor costs. Ultimately, reducing the gap with minimum wages abroad will be key for Japan to remain economically competitive.