Compared with the previous fiscal year's 4.5%, this year's potential increase in Japan's minimum wage standard has further increased; however, whether from the perspective of foreign exchange or rising prices, even with the biggest increase in nearly 30 years, Japan's real wage level is still in a continuous state of decline. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.
Caixin July 24th (Editor Shi Zhengcheng) According to local media in Japan on Thursday evening citing informed sources, the Central Minimum Wage Council of Japan has approached a decision to increase the minimum hourly wage guidance standard for the 2024 fiscal year by 5% (1004 yen -> 1054 yen), also raising the all-Japan weighted average to a new historic high.
This news has naturally affected the yen exchange rate. As of the time of publication, the decline of USD/JPY has continued to deepen, falling from the daily high of 155.98 to the level of 153.1 at one point.
![](https://postimg.futunn.com/news-editor-imgs/20240725/public/17218629539573913135144.png)
(USD/JPY daily chart, source: TradingView)
Wages are running against inflation and currency depreciation.
Informants said that the Central Minimum Wage Review Committee may have reached the conclusion that a significant increase in wages is necessary in the face of long-term high prices, and the committee will "soon formally establish the plan."
This committee is composed of experts in labor, labor-capital, and public interests, and mainly formulates guidelines for raising the minimum wage standard each year. Subsequently, Japan's local councils will determine local standards based on this guidance, with economically developed areas such as Tokyo (last year's minimum hourly wage standard of 1113 yen) and Osaka (1064 yen) having slightly higher standards, and remote areas such as Okinawa (896 yen) having lower than average standards.
Of course, from the perspective of foreign 'onlookers,' Japan's minimum wage increase has a sense of tension with the depreciation of the exchange rate.
For example, last fiscal year, at the end of July last year, this committee raised the minimum hourly wage guidance standard by 4.5% to 1004 yen. Converted into US dollars, it was $7.04. But even this year's increase to 1054 yen, converted into US dollars, is only $6.87. The situation is similar when converted into RMB. After this 50 yen increase, the "minimum hourly wage standard in Japan" priced in RMB changed from 50.46 yuan last year to 49.94 yuan.
Because of this, labor representatives called for a further increase in minimum wage increases at this year's meeting.
Even if we do not consider the exchange rate factor, Japan’s real wages have been shrinking for 26 consecutive months as of May this year, simply deducting the impact of rising prices.
According to statistics from Rengo, Japan's largest labor union, the average monthly salary increase for Japanese labor unions in the spring labor-management negotiations known as "Shunto" this year was 15,281 yen, equivalent to a 5.1% growth rate when calculated in yen, including pay increases based on seniority and wage increases. The last time the pay increase was over 5% was in 1991 during the end of the bubble economy.
"Even so, few people believe that this year's salary increase has improved their lives," said an official from Rengo, so it is important to maintain the trend of wage increases. From a longer-term perspective, the Japanese government has previously set a goal of "raising the minimum hourly wage to 1,500 yen as soon as possible in the 2030s."
It is worth mentioning that the size of the salary increase is also related to the size of the company. The average salary increase for small and medium-sized enterprises with fewer than 300 employees is 4.45%. Therefore, some employers at the Minimum Wage Review Committee also proposed that caution is needed in raising the minimum wage standard significantly, because some small and medium-sized enterprises cannot fully pass on the cost of employment increases.
What will the Bank of Japan do?
According to the schedule, the Bank of Japan is scheduled to hold a policy meeting next week and release a policy statement at noon on July 31st.
Unlike past policy meetings, the market is still in a state of uncertainty as to whether Japan will 'raise or not raise interest rates' next week.
On Thursday, informed sources were also quoted by the media as saying that the Bank of Japan's members will "debate whether a rate hike is necessary" during next week's meeting, while also unveiling a plan to halve bond purchases.
After ending the 'negative interest rate policy' this year, the market generally expects the Bank of Japan's next interest rate hike to start a new tightening cycle, bringing Japan’s monetary policy to a 'neutral level' - neither stimulating nor restraining the economy. Of course, this process will last for several years.