TOKYO: Japan will increase its average minimum wage to 961 yen (US$7.28) an hour, a record hike of 31 yen or 3.3 per cent from the current wage.
The minimum wage increase is expected to be implemented in October and comes after a government panel agreed on the proposal. This ends prolonged consultations as the nation battled rising inflation amid the Russia - Ukraine conflict.
According to a Kyodo News report, labour and management representatives on the panel agreed on the need for higher pay, but differed over how much the rise should be with inflation taken into account.
The Central Minimum Wages Council's subcommittee of the Labour Ministry finally agreed on the pay hike on Monday after it failed to reach an agreement in late July.
Last year, the council had proposed the minimum wage for all workers, including part-timers and contract workers, to be raised by 28 yen to 930 yen.
The need for a pay rise was heightened by the conflict in Ukraine as it caused energy, raw material and food prices to rise globally. Core consumer inflation in Japan has topped two per cent in recent months, pressuring households and increased calls for higher pay.
The Asahi Shimbun said the subcommittee established minimum wage guidelines for four groups of prefectures, depending on their economic situations.
Each prefectural government will then decide the minimum wage raise for their prefectures based on the guidelines.
After that, new minimum wage will be introduced in each prefecture around October.
The minimum wage has been raised by around three per cent in recent years, partly as a result of government pressure.
Employers who do not pay the minimum amount will be fined by the authorities.
The Kyodo News report said the Japanese government was also aiming to further increase the minimum wage in the country to 1,000 yen as soon as possible.
Prime Minister Fumio Kishida had called for more investment in the people as he focused on redistribution of wealth under his slogan of a "new capitalism."
"We'd like to see an increase that would be appropriate for the era of a new capitalism," said Deputy Chief Cabinet Secretary Seiji Kihara in a recent press breifing.
Japan's minimum wage is considered low compared with other major economies and there are also gaps between urban and rural areas.
In 2021, the highest minimum wage was 1,041 yen in Tokyo while the lowest was 820 yen in Kochi and Okinawa prefectures.
The weak wage growth is said to be a major reason why the central Bank of Japan needs to maintain its ultralow rate policy.
The general consumer price index, which is used to calculate real wages, has risen by around three per cent year on year for three consecutive months.
The domestic corporate goods price index, an index of prices sold and bought between companies, has also risen by more than nine per cent year on year since the beginning of this year.