Japan advisors call for minimum wage increase to boost consumption

[TOKYO] Japanese government advisors called for an increase in the minimum wage on Wednesday to boost consumer spending as part of a new package of structural reforms.

Prime Minister Shinzo Abe's government could decide how much it will raise the minimum wage before the end of the month as it compiles a set of policies to slow population decline, expand the labour force and meet its growth targets.

A large increase in the minimum wage could benefit low-income earners and counter criticism that the benefits of Mr Abe's plans to revitalise the economy have not trickled down to Japanese households that are most in need.

Private-sector members of the Council on Economic and Fiscal Policy, the government's top advisory panel, made the recommendation on the minimum wage and other policy steps at a meeting on Wednesday. "I want to lay the groundwork for these proposals to be put into place," Abe said at the meeting. "We need the private sector to increase capital expenditure and wages." Economics Minister Akira Amari, a central figure in economic policy, will use the panel's recommendations when deciding the structural reform package due later this month. "I do get a sense that the government is trying to make up for past mistakes," said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities. "During the first part of Abe's administration the government was more concerned about growth, but now the government is focusing more on employment and helping households." Raising wages is an urgent task for policymakers because they want consumer spending to drive domestic demand and pull the economy away from 15 years of deflation.

Japan's minimum wage differs by prefecture, but the highest minimum wage is 907 yen per hour payed to workers in Tokyo.

The minimum wage has been rising for the past few years, but Japan's rates are only slightly above the average for OECD members, and labour unions have argued for bigger increases.

Mr Abe, who took office late in 2012, met with initial success as his economic policies sparked a stock market rally and shareholders used their new-found wealth to fund a shopping binge.

However, average households started complaining that they were not benefiting.

An increase in the nationwide sales tax last year complicated the problem by causing low-income earners to cut back on spending, which triggered a recession.

A second sales tax increase is scheduled for 2017, and the government wants to avoid a repeat of what happened last year.

REUTERS