AKITA, Japan - To stem the outflow of young people from regional areas amid a tight labor market, prefectures in Japan are engaged in a minimum wage race in which even one yen can make a difference.
Akita Prefecture in northeastern Japan, having been in a battle for last place for several years, climbed out of the country's bottom ranking for hourly pay. But the move also sparked backlash from business leaders, resulting in the prefecture's advisory council delaying implementation of the wage hike for six months.
Akita, which had the lowest minimum wage in the country at 951 yen ($6) per hour in fiscal year 2024, raised it by 80 yen to 1,031 yen. The increase came as a surprise to Tomokazu Terada, president of Marudai, which operates five supermarkets in the capital city of Akita. He said the company was already struggling with soaring labor costs.
"I think the employees are happy, but management isn't reaping any benefits from climbing out of last place," Terada said. "It gives the impression that (the government) is charging ahead without regard for the real economy or business performance."
Japan's national weighted average minimum hourly wage is 1,121 yen, with regional rates ranging from 1,023 yen in prefectures like Okinawa in southern Japan to 1,226 yen in Tokyo, the highest. Driven partly by comparisons with neighboring prefectures, the competition to raise wages has intensified, and hourly pay has topped 1,000 yen in all 47 prefectures.
As the lowest hourly wage set by Japanese law, the minimum wage applies to nearly all workers, including full-time employees, part-time workers, temporary workers and foreign employees.
For workers, it is a lifeline that allows them to earn a living. From the perspective of small and midsized businesses, it can be viewed as a labor cost imposed by the government.
At Marudai, more than 80 percent of some 400 employees are non-regular workers, and many of them earn hourly wages close to the minimum wage.
"This means an increase of several million yen in monthly labor costs. Our financial situation is already on edge," Terada said.
Once a year, a national advisory panel under the labor ministry recommends guideline increases, which prefectural councils use in setting local minimum wages.
On July 28, the panel recommended raising the national average by 4.9 percent to 1,176 yen this fiscal year, a 55-yen increase and the second-largest on record. Prefectural councils are expected to set their minimum wages mainly this month.
Tomoaki Usuki, an Akita University professor who chairs the prefecture's advisory council, said senior prefectural officials had approached him early in the deliberations last fiscal year. "There was a strong request that we proceed with our deliberations with the aim of moving the prefecture out of last place," he said.
"Akita was dogged by the image of being 'the prefecture with the lowest wages in the country,'" said Ayaiki Soga, president of the Japan Trade Union Confederation, Akita, or JTUC-Rengo Akita, who served as a labor representative on the council. "Neither the labor nor management sides ever explicitly mentioned 'escaping the bottom rank.' But it was certainly on everyone's mind."
Akita lifted itself out of last place with the 80-yen increase -- the third-highest rise in the country. But the increase also put pressure on businesses.
The increase took a direct toll on Marudai. Although the company is recruiting store clerks at 1,050 yen or more -- 19 yen above the minimum -- finding staff remains difficult.
"The labor shortage is severe. Some stores can't function if even one veteran employee leaves, so we've raised the retirement age for part-time employees from 65 to 75. We'd like to boost hiring by offering higher hourly wages, but given our financial situation, that's not easy. We've barely been able to hire any new graduates for the past three years or so," Terada said.
Supermarkets must keep refrigerators and other equipment running outside business hours to preserve food. Marudai's annual electricity costs have risen by tens of millions of yen.
Just as it began to see results from efforts to cut costs, such as switching to alternative electricity providers, it faced rising prices caused by instability in the Middle East.
"It's difficult to pass on electricity and labor costs to product prices. Even if we improve efficiency by reducing the number of flyers we print or introducing self-checkout registers, the amount we can save is limited. Many of our customers are pensioners, so we don't feel that higher wages are translating into increased sales. I feel like the gap between urban and rural areas is becoming increasingly stark," Terada said.
But Marudai experienced some relief when Akita's advisory council delayed implementation of the new minimum wage -- typically set for October -- by about six months to March 31. Terada said the delay resulted in cost savings of 10 million yen or more.
The council took into account the impact on small and midsized enterprises. Minimum wage increases significantly affect companies' labor costs, often prompting opposition from business owners. Consequently, the effective date became a bargaining chip.
In fiscal 2024, 46 prefectures, excluding Tokushima Prefecture, where deliberations took longer, set the effective date for October. However, last fiscal year, only 20 prefectures implemented the increase in October, while 27 prefectures implemented it in November or later, with six of those carrying the implementation over into this year.
