Prime Minister Yoshihide Suga’s plan to boost the minimum wage is facing stiff opposition from small and midsize firms worried about their survival during COVID-19, and from lawmakers in his own ruling party amid concerns of a political backlash.
Suga said last month the government aims to raise Japan’s minimum wage, among the lowest in the Group of Seven economies, to ¥1,000 an hour from ¥902 “more quickly.” Suga believes the hike would help support households hit by COVID-19, boost competitiveness and spur inflation, according to government sources.
But smaller firms, which employ seven out of ten workers in Japan, have lobbied to scrap the plans. Some of Suga’s own Liberal Democratic Party (LDP) lawmakers are also pushing back amid concerns they could lose support from business owners in an election year, government and party sources said.
The heads of three lobby groups representing small firms held a rare joint news conference earlier this month expressing their opposition to the minimum wage hike, and wrote jointly to government and ruling party officials urging against the move, an official at the Japan Chamber of Commerce and Industry said.
“The joint action, which was made to express the collective opinion of small firms, was unprecedented,” the official told Reuters on condition of anonymity.
Akio Mimura, head of the business group, told the news conference this month that the tourism and restaurant industries were facing tougher conditions this year compared to 2020.
“I hear a lot of anxiety from small firms across the country,” Mimura said.
Policymakers have long considered wage hikes an important tool to boost consumer spending and fuel inflation, which remains elusive in Japan despite years of ultraloose monetary policy.
In theory, higher minimum wages could also help garner political support as it boosts people’s purchasing power.
“The quickest way out of deflation is to raise minimum wages and boost workers’ income as part of a reflationary policy,” said Shunsuke Mutai, part of a small minority of LDP lawmakers seeking minimum wage hikes across the board.
But he said some fellow lawmakers were “urging us to think twice about calling for minimum wage hikes.”
“They say voters won’t support us because we are antagonizing small firms,” Mutai added.
Under Suga’s predecessor, Shinzo Abe, the government raised the minimum wage by 3% for four years until 2020, when it was held largely steady, under his namesake Abenomics reflationary policy aimed at boosting growth.
At about $8 per hour, Japan’s current minimum wage is higher than the United States’ $7.3 but ranks below France and Germany’s $12, the U.K. and Canada’s $10 and South Korea’s $8.6.
While higher wages would help low-income households withstand the impacts of COVID-19, small businesses say the timing could not be worse.
“Now is not the time to raise minimum wages,” said Ryohei Sugawara, CEO of Ever Brew, who runs 33 restaurants in Tokyo, including a Belgian brewer chain, and employs 110 workers.
Ever Brew’s profits fell as much as 40% some months over the past year due to virus curbs, and Sugawara has managed to keep his business afloat thanks to government financing support.
“Given that Japanese firms are striving for survival, minimum wage hikes must be on hold,” Sugawara said. “Wage hikes may be important to spur consumption and eating out, but not now.”
Keiichi Hamano, who runs five small factories in Tokyo, said he had kept wages for his 60 workers steady over the past year.
Output at Hamano’s factories, which produce metal parts for cars, chipmaking devices, robots and other products, fell as much as 30% during some months at the height of the COVID-19 crisis, though monthly output has since returned to pre-pandemic levels.
“This is not a good time to raise the minimum wage,” Hamano said, adding that the government should wait “at least until the coronavirus is brought under control.
“Even then, wages should rise only gradually,” he said.
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