Prime Minister Fumio Kishida has achieved the government’s goal of raising Japan’s average hourly minimum wage to ¥1,000 (about $6.80) in 2023. In his address to an economic panel on August 31, he announced a new objective: to further increase the minimum wage to ¥1,500 by the mid-2030s. Economists, however, stress that setting a higher target alone won’t be enough to boost Japan’s stagnant wage growth. They argue that the government must tackle underlying structural issues to truly reverse this trend. Shunsuke Kobayashi, Chief Economist at Mizuho Securities, highlighted the importance of eliminating systems that discourage workforce participation, like the ‘¥1.3 million barrier’ affecting spouses in small companies. Workers earning above this threshold are required to pay social insurance premiums, leading to lower income. Many intentionally adjust their work hours to stay below this limit. While the average hourly wage for part-time workers has risen, their overall annual work hours have decreased, indicating a shift in labor dynamics alongside rising wages. This underscores the urgency of removing deterrent systems.

Achieving Japan’s goal of a ¥1,500 minimum wage by the mid-2030s will be a considerable challenge, requiring an annual wage increase of about 3.4% until then—a goal some experts view as “ambitious.” Given uncertain economic conditions, a more adaptable target may be a wiser approach, allowing room for negotiations between labor unions and management.