Japan considers 6% minimum wage increase amid inflation
A 6% rise in Japan’s national average minimum wage has been proposed by the country’s Central Minimum Wage Council, an advisory panel to the ministry, as reported by Reuters on August 4, 2025.
The increase would raise the national average minimum wage from 1,055 yen (US$7.15) to 1,118 yen (US$7.57) per hour, surpassing the 5% rise in 2024 and marking the largest annual jump since Japan’s current minimum wage determination system was introduced in 2002.
The proposed hike was announced amid rising economic and political pressure, as persistent inflation has continued to reduce household purchasing power.
Following recent election losses seen as a response to rising living costs, Prime Minister Shigeru Ishiba pledged to raise the national average minimum wage to 1,500 (US$10.6) yen per hour by 2030, accelerating a goal previously set for the mid-2030s.
Economic Impact of Japan’s Planned Minimum Wage Hike
The proposed increase is expected to significantly influence Japan’s overall minimum wage trends, as a relatively large portion of its workforce earns close to the minimum wage.
Additional financial strain may be placed on small businesses by steep wage increases, as such firms, employing about 70% of Japan’s workforce, are already required to allocate a larger portion of their profits to wages than larger companies.
In 2025, Japanese companies agreed to an average wage increase of 5.25%, the highest in 34 years and the third consecutive year of strong growth, driven by ongoing labour shortages and efforts to protect workers from inflation.
Wage Growth May Influence Central Bank Decisions
The Bank of Japan is expected to closely monitor wage trends when deciding whether to raise interest rates again.
Compared to other large economies, Japan’s inflation-adjusted interest rates have remained very low, as the central bank has been slow to scale back the economic support it provided over the past decade.
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