Japan plans to raise the minimum hourly wage by 4.9% to 1,176 yen, marking the second highest increase in history and providing support for the central bank to raise interest rates.

(1) An advisory panel of Japan’s Ministry of Labor has recommended raising the national average minimum hourly wage for this fiscal year by 4.9% to 1,176 yen (approximately $7.18 USD), representing an increase of 55 yen per hour. This is the second-highest rise in history, only surpassed by last year’s record 6.3% increase. (2) The new standard will cover more than 50 million workers and is expected to be gradually implemented from October, after local authorities determine the specific standards. (3) This increase will help promote a virtuous cycle in which wage growth drives demand and a stable increase in prices—an important factor for the Bank of Japan’s further interest rate hikes. Meanwhile, the weak yen is pushing up import costs for energy and food, increasing pressure on the central bank to raise rates.