A Japanese government panel on Wednesday proposed raising the average hourly minimum wage by a record 28 yen to 930 yen ($8.4) in fiscal 2021, a move that is likely to deal a further blow to businesses already struggling due to the coronavirus pandemic.
If realized, the 3.1 percent increase proposed by the labor ministry's advisory panel in its guidelines on the minimum wage will be the biggest since fiscal 2002, when it started using an hourly wage to propose a rough target for hikes.
The envisaged hike also comes as Prime Minister Yoshihide Suga has pledged to achieve an average hourly rate of at least 1,000 yen "as soon as possible" to help nonregular workers earn more and correct the wage disparity between them and regular employees.
The hike by 28 yen will top the previous record increase of 27 yen in fiscal 2019, according to the ministry.
But the gap between urban and rural areas remains wide, even as Suga pushes to promote regional revitalization.
Under the proposal, the minimum wage in Tokyo would be 1,041 yen, the highest among the nation's 47 prefectures, while those in seven prefectures in rural areas would rank the lowest at 820 yen.
None of the prefectures, however, is expected to see a minimum wage below the 800 yen level.
Following the proposal, local panels in each prefecture will finalize the revised minimum wages by August, taking into account their economic situations. The new minimum hourly wages will be adopted around October.
Still, Japan's minimum wage is low compared to other major developed economies. According to Organization for Economic Cooperation and Development data for 2020, it ranks below France's $12.2, Germany's $12.0 and Britain's $11.1, although it is higher than $7.3 of the United States.
In fiscal 2020 through March, the panel did not present any numerical targets for the minimum wages, implying the current levels should be maintained. The decision came amid fears that wage hikes could worsen the business conditions, especially for small and midsize firms hit by the initial economic impact of the pandemic.
As a result, the average minimum wage thus only inched up 1 yen last year.
Until fiscal 2019, the country's average wage floor had jumped over 3 percent for the fourth straight year under the administration of Suga's predecessor Shinzo Abe, whose "Abenomics" policy mix entailed bold monetary easing, fiscal stimulus and structural reforms to boost growth.