Kishida outlines new economic measures for 'sustainable wage growth'

Prime Minister Fumio Kishida on Monday unveiled an outline of new economic measures that are designed to facilitate momentum for “sustainable wage growth” while easing the impact of inflation.

The economy is recovering from the pandemic and is at a turning point on whether it will be able to leave behind a long-lasting “cost-cutting economy,” Kishida told reporters.

“We have the chance to move the economy to a new stage and must not miss such an opportunity,” Kishida said.

And since price hikes have been harming the economy, the government will deal with it through an array of measures to ease the burden on people and boost wages, Kishida said.

To fund the new stimulus, the government plans to draft a supplementary budget, which is expected to be deliberated in the upcoming parliament session this fall.

The size of the budget is unclear, but some ruling party lawmakers have said that ¥15 trillion ($101 billion) to ¥20 trillion will be needed.

Some of the economic measures are intended to raise earnings by easing workers’ concerns about so-called annual income barriers.

For instance, spouses working at companies with less than 100 employees and earning more than ¥1.3 million each year generally lose their status as dependents and need to pay social insurance premiums, which results in a drop in their disposable income. Because of that, many workers cap their work hours so as not to exceed that ceiling.

The rule also in principle applies to those earning more than ¥1.06 million at companies with 100 employees or more.

Starting in October, the government is reportedly planning to allow people to keep their dependent status for up to two consecutive years even if their income exceeds ¥1.3 million. For the ¥1.06 million barrier, Kishida said the government is looking to provide subsidies to companies that raise wages for those workers affected by the ceiling to help cover the cost of social insurance premiums.

“The government will be supporting everyone who will be climbing over the ¥1.06 million barrier,” so that they can increase their disposable income, Kishida said.

Economists have pointed out that these barriers have discouraged many part-time workers from increasing their work hours. Therefore, despite some wage growth for Japan's part-timers, their actual hours have dropped.

According to Dip, a Tokyo-based firm providing job-listing services, the average hourly wage for part-time workers in April 2013 was ¥925, while the figure for August of this year was a record high of ¥1,319. But the overall annual work hours per part-time employee had fallen to 956 in 2022, compared with 1,093 hours in 2013.

The economic package will also include support for those who wish to increase their income by improving their skills.

To assuage the impact of persistent inflation, the government will also extend its subsidy program for oil wholesalers to curb the prices of gasoline, light oil, heavy oil and kerosene, which was initially scheduled to end this month.

Earlier this month, the average retail gasoline price nationwide hit ¥186.5 per liter — a record high since comparable data became available in 1990 — because of the yen’s weak value and an uptick in crude oil prices.

By extending and beefing up the subsidy program, Kishida said the government aims to lower costs at the pump next month to around ¥175.

Inflation has topped the Bank of Japan’s target of 2% for more than a year, placing a burden on households. Although Japan’s gross domestic product grew at an annualized 4.8% in the April-June quarter, household consumption dropped 0.7% quarter-on-quarter, government data shows.