After successfully achieving the government’s set goal of raising Japan’s average hourly minimum wage to ¥1,000 (approximately $6.80) in 2023, Prime Minister Fumio Kishida wasted no time in announcing the next objective. In an address to a key economic panel on August 31, he emphasized the necessity of a further and stable increase in the minimum wage. Kishida articulated Japan’s aim to elevate it to ¥1,500 by the mid-2030s. Economists, however, are quick to point out that merely establishing a higher minimum wage target will not be sufficient to revitalize Japan’s stagnant wage growth. They assert that the government must address underlying structural impediments to truly reverse this trend. Chief Economist at Mizuho Securities, Shunsuke Kobayashi, emphasized the need to eliminate systems that discourage workforce participation rather than solely setting new wage goals. One such impediment is the ‘¥1.3 million barrier,’ affecting spouses in companies with fewer than 100 employees. Those earning above this threshold are obligated to pay social insurance premiums, resulting in diminished income. Consequently, many workers purposefully adjust their work hours to remain below this ceiling. While the average hourly wage for part-time workers has notably increased, the overall annual work hours per part-time employee have seen a decline, indicating a shift in labor dynamics relative to rising wages. This highlights the urgency of eliminating deterrent systems.

As Japan aspires to raise the minimum wage to ¥1,500 by the mid-2030s, it faces considerable challenges. This endeavor demands an annual wage increase of approximately 3.4% until then, a goal some experts consider “ambitious.” In light of uncertain economic conditions, setting a more relative target might be a more prudent approach, allowing for flexibility in negotiations between labor unions and management.