Tokyo: Over half of Japanese companies plan to raise wages by at least 3% for the next business year, according to a recent Reuters survey. However, a majority expressed reservations about Prime Minister Shigeru Ishiba’s ambitious goal to boost minimum wages by more than 40% over the next five years.
The survey, conducted by Nikkei Research from Oct. 23 to Nov. 1, included responses from 240 companies out of 505 polled. Results showed that 42% of companies plan wage increases between 3% and 5% starting April 2025, with 9% targeting raises of 5% to 7%. Meanwhile, around 41% expect to limit wage growth to between 1% and 3%.
Following decades of stagnant wage growth, policymakers have identified increasing pay as crucial for stimulating domestic demand and achieving sustainable economic expansion. Bank of Japan Governor Kazuo Ueda emphasized that sustainable wage increases are a prerequisite for any consideration of a future interest rate hike.
The survey also found that over two-thirds of respondents intend to maintain or increase the wage hike momentum seen this year, which averaged a 5.1% increase, marking the highest annual rise in three decades. Notably, 52% of firms committed to raising wages regardless of fluctuations in earnings.
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Despite the overall positive outlook on wage hikes, many firms expressed concerns over Ishiba’s proposal to increase the minimum wage to 1,500 yen ($9.81) per hour within five years. Nearly two-thirds of respondents deemed this target unrealistic. “With rising raw material and utility costs affecting small and mid-sized businesses, drastic wage hikes could push many firms to the brink of closure,” commented a manager at a ceramics company.
The ruling Liberal Democratic Party (LDP) has pledged to expedite the average minimum wage increase to 1,500 yen per hour by the decade’s end, moving up the initial target from the mid-2030s. This proposal has sparked considerable backlash within the business sector.
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Regarding work practices in the post-COVID-19 era, the survey showed that 83% of companies prefer employees to work from the office, while only 17% are open to expanding remote work. A manager from a paper and pulp company explained that “close communication in a traditional office environment is crucial for accelerating product development.” Meanwhile, others pointed out that remote work is often impractical for the manufacturing sector, potentially leading to fairness issues for employees on production lines.
Among firms favoring remote work expansion, many believe flexible arrangements could be an advantage in attracting and retaining talent amid Japan’s labor shortages.
