When Costco Wholesale opened its warehouse in a rural Japanese town not far from Tokyo last year offering hundreds of jobs at eye-popping pay, a nearby noodle shop chain took a drastic step: It hiked hourly wages by a third.

It was an almost unthinkable decision for Yamada-udon, which sells ¥390 ($2.48) bowls of noodles and for which the slightest rise in cost requires acrobatic scrambling to stay in business.

"For us, even a one or two yen rise in raw materials costs is tough, so to increase hourly pay by even ¥10 is extremely challenging as we need to generate far more sales," said marketing director Takehiro Ehashi.