Japan to raise minimum wage by record amid inflation woes

Japan will raise the minimum hourly wage to an average of 1,004 yen ($6.91), exceeding the level proposed by a government panel, as inflation crimps consumers’ spending power.

Japanese prefectures are set to boost the lowest pay by an average of 43 yen an hour for the current fiscal year, the labor ministry announced on Friday, Bloomberg reports.

The increase, the largest since records of wage rises began in 1978, will take effect in October.

The government’s advisory panel had recommended an increase of 41 yen to 1,002 yen for this fiscal year.

Tokyo, which has the highest minimum wage in the country, plans a raise of 41 yen to 1,113 yen, while neighboring Kanagawa prefecture’s new lowest level will be 1,112 yen after a 41 yen increase. Okinawa, with the lowest minimum, plans a 43 yen hike to 896 yen.

Persistent inflation continues to weigh on Japan’s economy, and while overall cash earnings for all workers rose 2.3% from a year ago in June, they actually declined 1.6% when adjusted for price rises.

The impact of payrolls failing to keep up with inflation has weakened consumer purchasing power. The gross domestic product figures for the last quarter showed strong external demand driving a surprising annualized growth rate of 6%, but the data also indicated weakness in business and private spending.