Japan PM advisers urge minimum wage hikes, stick to fiscal reform

© Reuters. FILE PHOTO: A man holding an umbrella crosses a street at a business district in Tokyo February 26, 2015. REUTERS/Yuya Shino

By Tetsushi Kajimoto

TOKYO (Reuters) – The private-sector advisers to Japanese Prime Minister Yoshihide Suga on Friday called for raising minimum wages this fiscal year to stimulate private consumption as the world’s third-largest economy struggles to contain a prolonged coronavirus pandemic.

The four advisers at the Council for Economic and Fiscal Policy called on the government to stick to its budget-balancing target as massive coronavirus-related spending has strained the industrial world’s heaviest public debt burden.

The proposals, which were made at the council’s gathering, could be reflected in government’s mid-year policy guidelines, which will provide the basis for next fiscal year’s budget, to be compiled in late December.

If the economy makes a progress towards normalisation with the help of vaccinations, real GDP is expected to return to pre-pandemic levels as early as this autumn, the advisers told the meeting.

However, downside risks warrant close attention, they added, given that a third state of coronavirus emergency was enacted for the capital, Tokyo, and some other areas in late April and has been extended until the end of this month.

The advisers said pay increases, including minimum wages, should give a boost to sustainable growth and prevent poverty, particularly among low-paid non-regular workers – many of whom are part-timers and contract workers.

Japan must regain the momentum towards minimum wage increases to 1,000 yen per hour in order to achieve swift economic recovery, they said, calling for continuing the efforts seen in recent years.

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Minimum wages had risen 3% on average a year from fiscal 2017 to 2019, but they stopped rising last fiscal year as the pandemic dealt a blow to corporate profits.

Suga’s aim for boosting the minimum wage is facing stiff opposition from Japan’s small and midsize firms, worried about their survival during COVID-19.

Japan has compiled three pandemic-specific packages worth a combined $3 trillion. It has vowed to balance a primary budget, which excludes new bond sales and debt servicing costs, by fiscal year end in March 2026 to rein in dire public finances.

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