Wednesday, 27th July 2016
In Business In Japan,
Japan set to raise minimum wage
Workers in Japan can expect to see their pay packets boosted after the government announced plans to raise the minimum wage.
Pay will go up by three per cent for the lowest paid members of staff in the country, as a bid to promote consumer spending is launched.
The plans will be implemented this fiscal year and are hoped to address criticism that many low-income earners have been left behind when it comes to Japan’s economic policy.
Prime minister Shinzo Abe is keen to reverse 15 years of deflation with his own brand of Abenomics and raising wages could really help with this.
Yoshihide Suga, chief cabinet secretary, told a press conference: "It is extremely important to stimulate consumer spending by raising the minimum wage, which will help Japan escape deflation and contribute to a positive economic growth cycle."
Increasing the minimum wage is likely to encourage other wages to rise, which would be good news for the Bank of Japan (BOJ).
It is aiming for two per cent inflation and needs moves like the one just announced to help it achieve this goal.
The minimum wage in Japan was raised last fiscal year too, but by 2.3 per cent, taking it to 780 yen (£5.63) per hour.
An additional three per cent is worth 24 yen (17p), putting the new rate at 804 yen (£5.81) per hour.
When Abe initially took office towards the end of 2012, his economic policies performed well, mainly down to quantitative easing by the BOJ and consumer spending, which led to a stock market rally.
This was then followed by a period of lost momentum, with wages only increasing marginally and investors crying out for bolder moves from the government.
Investors have been frustrated by start-stop patterns of growth within the Japanese economy for years.