Ishiba aims to keep wage hike momentum; small businesses worried

Prime Minister Shigeru Ishiba said Tuesday the government will work with business leaders and labor unions to create an environment where salaries keep rising, vowing to achieve his goal of raising Japan's average minimum hourly wage to 1,500 yen by the end of the 2020s.

But Ishiba also instructed relevant ministers to draw up measures by next spring to ease concerns among smaller businesses unable to increase salaries rapidly.

He met with representatives from the Japanese Trade Union Confederation and business lobbies including the Japan Business Federation at the prime minister's office, starting discussions toward annual minimum wage revisions and wage negotiations between labor unions and management in 2025.

The average minimum hourly wage for fiscal 2024 was set at 1,055 yen. Achieving Ishiba's target of raising it to 1,500 yen in the 2020s requires 7.3 percent growth each year, and business leaders who attended Tuesday's meeting expressed their concerns.

"Small business owners in rural areas cannot pay if the pace of wage hikes is too fast," Ken Kobayashi, chairman of the Japan Chamber of Commerce and Industry, told reporters after the meeting.

Masakazu Tokura, head of the business federation or Keidanren, said, "It takes time for management to make improvement efforts."

At the meeting, Ishiba also urged companies' efforts to realize "significant salary hikes" at annual wage negotiations in early next year, as the country has been facing rising prices due largely to higher import costs amid the weaker yen.

In the so-called shunto spring wage talks this year, member unions of the confederation secured an average 5.1 percent pay rise, topping 5 percent for the first time in more than 30 years. The average pay hike for smaller firms, meanwhile, stood at 4.45 percent in 2024.

In another effort to mitigate the impact of soaring prices and boost consumption, Ishiba is planning to pledge in a parliamentary policy speech Friday that the government will raise the nontaxable income threshold from the current 1.03 million yen, an issue being discussed as part of tax changes for fiscal 2025, sources close to the matter said.

Trump's policies

Also Tuesday, the government warned of the potential adverse impact of U.S. President-elect Donald Trump's economic policies, as it maintained its view that the country's economy is recovering moderately in its monthly report for November.

The Cabinet Office, which is in charge of economic and fiscal policy, said the economy is "recovering at a moderate pace, although it remains paused in part," using the same expression for its overall assessment for the fourth straight month.

The government upgraded its assessment of imports, which typically reflect robust domestic demand, citing improved shipments of goods such as personal computers from China and automobiles from India.

But the report said "full attention" should be given to the "future policy trends in the United States," following Trump's victory in the U.S. presidential election in early November. He will assume office in January.

Trump's proposed plans, such as raising tariffs and cutting taxes, could affect the U.S. economy and accelerate inflation, a Cabinet Office official said.

Any impact on the world's largest economy is bound to affect Japan, given the strong economic ties between the two countries, the official said.

Consumer prices, a key gauge of inflation, were changed from "rising moderately" to "rising recently," due partly to a surge in food prices including rice. It was the first change in 10 months.

The Cabinet Office revised its wording on corporate goods prices from "the pace of rise is slowing" to "modestly rising."

The assessment of public investment was downgraded, as the effect of public works financed by a supplementary budget for the previous fiscal year that ended in March tapered off. The budget was aimed at strengthening infrastructure.

The government made no changes to its evaluations of other key components such as private consumption, which accounts for more than half of the nation's gross domestic product, and exports.