Korea’s minimum wage to exceed Japan’s due to forex

TOKYO – South Korea’s minimum wage per hour is poised to exceed Japan’s for the first time as early as this October.

A subcommittee at Japan’s central minimum wage council has decided to raise Japan's average minimum wage in fiscal 2022, or from October 2022 to September 2023, by at least 31 yen or 3.3%. It is the largest hike ever, set to raise Japan’s minimum average hourly wage to 961 yen ($7.35), according to the country’s local media reports on Monday. 

At the two regional extremes, Tokyo will enforce the highest minimum wage of 1,041 yen in fiscal 2022 while Okinawa Prefecture will apply the lowest of 820 yen.

Despite the record hike, the 961 yen average minimum wage will fall below Korea’s 9,620 won ($7.36), based on the Japanese yen against the Korean won as of 12:00 p.m. on Monday, 9.84.    

Japan has traditionally topped Korea in terms of average minimum wage. But that may be reversed later this year as the yen has depreciated since early 2021 and the minimum wage gap between the two countries has widened over the past two years. Korea’s minimum wage has increased by 5% on average per year over the last two years while Japan’s has risen by 3%.

Previously, the largest jump in Japan’s average minimum wage had been 28 yen for fiscal 2021. The Japanese government subcommittee agreed on the largest-ever hike given the pressures on households due to rising costs, according to major Japanese daily The Asahi Shimbun.

But the country’s new minimum wage may fall short of Korea’s, due to the sharp drop in the yen. The yen against the won declined by 3-7% to 9.79-10.03 since the second quarter of this year, compared with 10.11-10.81 during the same period last year.

Some other developed countries are accelerating minimum wage hikes. Germany is slated to increase the minimum wage by 14.8% to €12 ($12.33) effective in October, following the 6.4% rise to €10.45 in July.

France raised the minimum wage by 2.6% to €10.85 in May of this year. Los Angeles, California, increased its minimum wage by 6.9% to $16 last month. Compared to these jurisdictions, Japan's minimum wage is at the lowest level.

Japanese economists warn that if the country’s minimum wage falls below Korea’s, Japan will lose even more Southeast Asian workers that supplement the workforce amid a labor shortage. Japan has expanded the employment of foreign workers as the country’s population has reduced since 2015.   

Some migrant workers in Japan have seen the value of their income dramatically drop in the past decade.

According to Dai-ichi Life Research Institute, Japan’s labor market attractiveness index for Vietnamese workers plunged from 36.7 in 2011 to 20.5 in 2021, meaning Vietnamese workers in Japan could earn 36.7 times their income in Vietnam as of 2011, and that ratio dropped to 20.5 times last year. For Chinese workers in Japan, the index fell from 8.4 to 3.6 during the same period.

To keep up with other countries' wage increases, the Japanese government will further raise the minimum wage to 1,000 yen as early as possible. 

Write to Yeong-Hyo Jeong at hugh@hankyung.com
Jihyun Kim edited this article.