Japan is aiming to raise its minimum wage by 3 percent annually starting next fiscal year. The move is part of a larger stimulus package aimed at boosting consumer demand.
“We need to ensure continuous economic growth supported by rising wages and the minimum wage must be included in this process,” Prime Minister Shinzo Abe said.
The decision does not require approval by parliament, a Cabinet Office official told Reuters. Under Japan’s decentralized system of government, a central panel makes wage recommendations to local bodies, which set regional minimum wages, according to the Financial Times.
A 3 percent wage increase is greater than this year’s wage hike of 2.3 percent. In addition to lifting pay floors, the government said it will also strengthen policies designed to encourage women to join the workforce, and plans to loosen regulations to stimulate corporate investment.
The moves come as the Bank of Japan seeks to stave off deflation and bring inflation to its 2 percent target. Elevated consumer spending is seen as a significant tool to boost demand and thereby reduce the risk of deflation -- something Japanese policymakers have long battled. In September, Japan officially fell back into deflation for the first time since April 2013, fueling doubts over the government’s ability to meet its inflation goal.
The country’s national average hourly minimum wage last fiscal year -- 780 yen, or $6.36 -- is moderate by Organization for Economic Cooperation and Development standards. It is close to the United States' federal minimum of $7.25, but it lags behind pay floors in Australia, Belgium, France and the United Kingdom.
As Bloomberg noted earlier this year, Japan’s average minimum wage will buy you a bowl of ramen noodles. Of the country’s 66 million workers last year, at least 3.2 million workers were earning the minimum, according to the labor ministry.